Financing your co-operative

December 17, 2015 - Tags: Social enterprise Financing

This guest blog is provided by Co-operatives Policy, which provides analysis, advice and support to promote co-operative business innovation and growth in Canada.

Did you know co-operatives are more likely to be successful in achieving financing than traditional small to medium-sized enterprises (SMEs) in Canada?

It's true. We know this from the findings of the Survey on Financing and Growth of Small and Medium Enterprises, 2014, which included a sample of SME co-operatives (non-financial co-ops with 1 to 499 employees and annual gross revenues more than $30,000).

If you are considering how to finance the start-up or expansion of your co-operative business, here is what you need to know from the survey:

  • Your co-operative is more likely to be successful in achieving financing than you think. In fact, when compared to traditional SMEs, co-operatives get higher approval rates and larger average authorization amounts when they request financing.
  • Ask your local credit union or bank about debt financing options. Non-residential mortgages, term loans, lines of credit and credit cards were the most popular form of financing for co-ops in 2014. They experienced an overall 93% approval rate (for full or partial amount authorized) and achieved an average authorization amount of $535,000 (other SMEs experienced an 85% approval rate and an average authorization amount of $167,000).  Co-operatives found the most success in achieving debt financing from their local credit unions and caisses populaires.
  • Ask your supplier about trade credits as a financing tool for your co-operative. Trade credits were the second most important source of financing for co-operatives. These credits are generated when a product or service is purchased on credit from a supplier for payment at a later date. Co-operatives experienced a 99% approval rate and an average authorization amount of $389,000.
  • Apply to a government program for financing. The co-operatives that applied for government grants, subsidies and non-repayable contributions were more likely to be approved than traditional SMEs. As a start, you can review available programs and services found on the Canada Business Network.
  • Leasing a vehicle, equipment or hardware might help you grow your business. Although co-operatives did not use leasing as much as other financing sources, the ones that did had 100% of their request authorized.

The data is available for free on Innovation, Science and Economic Development's website so you can learn more about the experiences of co-operative and traditional SMEs in accessing financing in 2014.

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