Co-op Development Funds Inventory Report
Co-op Development Funds Inventory OVERVIEW In the fall of 2014, Co operatives and Mutuals Canada created an updated inventory of Canadian financing programs that are well adapted to the co operative model. This inventory constitutes the second stage of CMC s assessment of capitalization tools accessible to the Canadian co operative movement. In 2013, CCA produced a report on Government-Facilitated Capitalization Measures for Co operatives in Canada, which included provincial tax credit instruments like Nova Scotia s Community Economic Development Investment Fund (CEDIF). Finally, a third study focusing on innovative capitalization tools, like the Unleashing Local Capital program in rural Alberta, will follow the present inventory to complete the picture of the capitalisation tools available to co-ops in Canada. This 2014 inventory focuses on established funds, and not capitalization strategies. While there are numerous financing programs open to co operatives across the country (government, co operative sector, community-based, social enterprise/social economy-focused), as Table 1 shows, the number of programs determined by this inventory to have a strong understanding of the co operative model and/or of the role of capital in a co operative is quite limited in many regions. For example, community-based or social enterprise funds can be a potential option for co operative financing because of their focus on funding enterprises with a good social mandate; however, this does not necessarily mean they have an adequate understanding of the co operative model and/or of the role of capital in a co operative. This can create problems as certain lending conditions may be incompatible with the regulatory/legislative framework of the co operative model. An example might be a case where investors require a certain amount of power over the decision making of the enterprise while the co operative governance cannot allow that. For this reason, only a few funds that seem to prioritize a co operative mandate like the Jubilee Fund in Manitoba and the Social Enterprise Fund in Edmonton were included in the inventory. However, even some of these funds might not prove to meet our rigorous criteria upon further investigation. In total, 51 different funds were included in the inventory with approximately half of them administered by an organization in the co operative sector. We acknowledge that any study of this kind is limited because financing programs products and capacities are subject to change over time. This report aims to capture as accurately as possible the current financing gaps in 2014. This report maps the inventory findings with four tables: 1 Funds by Geographic Area and Total Capitalization of Funds Financial Products Offered by Each Program Stage of Business Development Funded by Sector Financing Needs Funded by Sector 1 The categories were adapted from a similar study conducted in 2010 in Quebec. 2
TABLE 1: Funds by Geographic Area and Total Capitalization of Funds 2 CO OPERATIVE SECTOR INSTITUTIONAL PARTNERSHIP/OTHER *Indicates that the co operative sector fund also funds social enterprises and/or non-profits. Table 1 CODE Program NATIONAL Geographic Area N1 Tenacity Works Fund (CWCF) All $500,000 Total Capitalization N2 CWCF Technical Assistance Program All $12,000 yearly N3 Co-operators Co operative Development Program All $150,000 yearly N4 Co-operators Community Economic Development Fund* All Aprox. $10 million 3 N5 Co-operators National Co-op Challenge All $200,000 yearly N6 Canadian Alternative Investment Co operative (CAIC)* All $7 million N7 First Nations, Métis and Inuit Co operative Development All $50,000 yearly Program N8 Community Futures Development Corporations All N/A ARCTIC AR1 Arctic Co-op Development Fund (ACDF) NWT, Nunavut $44.2 million & Yukon ALBERTA A1 Social Enterprise Fund Edmonton Area N/A BRITISH COLUMBIA BC1 Momentum Fund (BC Co operative Association) BC $87,700 BC2 Vancity Community Project Grants Program* BC $900,000 (2013 amount) 4 BC3 Vancity Credit Union* BC N/A BC4 CCEC Credit Union Loan Programs* Vancouver N/A BC5 Resilient Capital Program BC $14.5 million MANITOBA M1 Co operative Loans and Loans Guarantee Board MB N/A M2 Manitoba Cooperative Assistance Fund MB $30,000 5 M3 Manitoba Tax Credit Fund MB $30,000 (2014/15) 6 M4 Assiniboine Credit Union Community Enterprise Winnipeg $450,000 7 Development Grants* M5 Assiniboine Credit Union Sustainable Community Grant Winnipeg $450,000 Program* M6 Jubilee Fund Winnipeg $1.6 million NEW BRUNSWICK NB1 Fonds intercoopératif de développement-acadie Ltée (FIDA) NB $74,717 2 When available the total capital investment in each fund or the yearly investment is recorded. N/A means this information was not available. 3 This is the combined total for both Co-operators Foundation CED Funds (Co-operators Fiftieth Anniversary Community Fund (for charities only) and the Co-operators Community Economic Development Fund). 4 Only a small percentage of this community project grant money was given to co operatives. 5 Funds are provided by the Province on a yearly basis without further commitment. 6 The amount varies depending on the Annual Plan, which is budgeted based on the annual contributions of the Manitoba Cooperative Community. 7 Currently, $450,000 yearly is allocated for ACU s Community Donation programs (Grants and Sponsorships). ACU s policy is to donate a minimum 2.8% of pre-tax earnings (averaged over three years) annually to support community projects, programs and events, with at least 75% awarded in the form of grants. 3
Table 1 CODE Program Geographic Area Total Capitalization NEW BRUNSWICK NB2 Coopérative d'investissement du Nord-Ouest Ltée North-Western $235,000 NB NB3 Saint John Community Loan Fund Saint John N/A NB4 Business NB NB N/A NEWFOUNDLAND & LABRADOR NL1 Co operative Equity Investment Fund NFLD $250,000 NOVA SCOTIA NS1 Small Business Loan Guarantee Program (NS Co operative NS $50 million Council, Atlantic Central, NS Gov't, local credit unions) NS2 FarmWorks Community Economic Development Investment Fund* NS $271,500 (2014 amount) 8 ONTARIO O1 Carrot Cache Community Resource Inc.* ON $120,000 (2015 amount) O2 Fonds de microcrédit pour les entreprises francophones ON- Southern $500,000 Fondation francro-ontarienne / Le Conseil de la coopération de l Ontario O3 Ottawa Community Loan Fund Ottawa N/A O4 Toronto Enterprise Fund Toronto > $1 million yearly O5 Ontario Trillium Foundation Grants ON $110 million yearly QUEBEC Q1 Coop Essor QC $45 million Q2 Capital régional et coopératif Desjardins (CRCD) QC $1.2 billion Q3 Réseau québécois du crédit communautaire (RQCC) QC $5 million Q4 Réseau d'investissement social du Québec (RISQ) QC $8.3 million Q5 Centres locaux de développement (CLD) [Fonds local de QC N/A développement et Fonds de développement et l'économie sociale] Q6 Fondaction CSN (FCSN) QC $843 million Q7 Filaction (Fil.) QC $50 million Q8 Fiducie du chantier de L'économie Sociale (FCES) QC $52.8 million Q9 Caisse d'économie solidaire Desjardins (CECOSOL) QC $477.88 million Q10 Sociétés d'aide au développement des collectivités (SADC) QC N/A Q11 Coopsco QC N/A Q12 Fédération des coopératives funéraires du Québec (FCFQ) QC N/A Q13 Fédération des coopératives d'alimentation du Québec QC N/A (FCAQ) Q14 Coopérative fédérée et grossistes en alimentation (CF & GA) QC N/A Q15 Fédération des coopératives du Nouveau-Québec (FCNQ) QC $15 million Q16 CDR Estrie, CDR Saguenay-Lac-Saint-Jean, CDR Montréal- QC N/A Laval (CDR) Q17 Investissement Québec QC N/A SASKATCHEWAN SK1 Affinity Micro Finance Program* SK N/A 8 Over the three years of operation this CEDIF co operative has raised $721,000 in investments. 4
TABLE 1 ANALYSIS: FUNDS BY GEOGRAPHIC AREA AND TOTAL CAPITALIZATION OF FUNDS The regional capacity for meeting the financing needs of the co operative sector varies greatly in Canada. Provincially, Quebec with its prioritization of the co operative model/social economy approach has a substantial number of co operative focused funds (17 funds) and the nine funds that made available their total capitalization data each have over $5 million in their fund. In contrast, in the rest of Canada there is significantly less capacity. The other provinces and territories all have only six or less funds that are well adapted to financing co operatives. Very few of these province and territory restricted funds with available data on the total amount available in the fund have more than $1 million in the fund, which means their capacity for larger lending limits is limited. Some provinces (Alberta, Saskatchewan and Newfoundland & Labrador) only have one relevant fund and Prince Edward Island has none. The comparative case of capitalization options in the Maritime provinces of Nova Scotia versus PEI or the significant variance in co operative development focus of the different Community Futures Development Corporations are two examples that demonstrate the provincial/regional discrepancies. The inventory findings indicate the need for financial tools at the national level with a strong co operative development mandate to help remedy the significant discrepancies between different regions in the country. The current financing capacity at the national level is insufficient. Only seven co operative friendly national funds were identified and the total capitalization capacity of many of these funds is not very substantial (TWF: $500,000 total, CWCF technical assistance fund: $12,000 yearly, CCDP: $150,000 yearly, CNCC: $200,000 yearly, Co-operators CED Fund: around $10 million total, CAIC: nearly $7 million total and First Nations, Métis and Inuit Co operative Development Program: $50,000 yearly). The total amount or a yearly amount of capital investment in the other two national funds was not available. Two of the seven funds focus exclusively on the needs of worker co operatives, leaving only five funds capable of meeting the financing needs of all co operative sectors. Further, as noted above, the relevance of the Community Futures Development Corporations program is limited to certain provinces. It is not a consistently applicable funding program option. The data in the next three tables reflects this general pattern of uneven co operative development financing capacity, but maps how it plays out at a level of greater detail. Particular attention will be paid to the capacity of national funds open to all sectors of co operatives, as it is here that an addition of new financial tools can have the broadest potential reach. 5
TABLE 2: Financial Products Offered by Each Program Note: A blank space means the fund does not offer that type of financial product. Table 2 Loan Loan Guarantee N1 $15,000 - $50,000 Yes NATIONAL Grants N2 $500 Stage 1 $500 Stage 2 N3 Up to $20,000 N4 Up to $20,000 N5 $25,000 and $500 N6 Up to $50,000 N7 $5000 - $10,000 N8 Varies ARCTIC AR1 Limit = 15% of total assets of the Fund (would be $6.6 million) Yes (Rarely offered) Preferred Shares ALBERTA A1 No minimum or maximum (*highest to date: $4.27 million) BRITISH COLUMBIA BC1 $5,000 - $25,000 BC2 Up to $15,000 (Generally range from $5,000 - $12,000) BC3 Microloans: Up to $75,000; Lending circles: Up to $7,500 BC4 Varies depending on need and capacity of group and CCEC Credit Union BC5 $100,000 - $1.5 million MANITOBA M1 Case specific Case specific M2 Up to $2,000 M3 Up to $2,000 M4 Up to $5,000 M5 $500 - $5,000 M6 Case specific (Housing co-ops only) Case specific NEW BRUNSWICK NB1 Up to $50,000 $2,500 - $5,000 Up to $50,000 NB2 Case specific Case specific Case specific NB3 Up to $7,500 NB4 Varies Case specific Yes Leasingpurchase Agreement 6
Table 2 Loan Loan Guarantee Grants Preferred Shares NEWFOUNDLAND & LABRADOR NL1 Up to $15,000 (matched on 3:1 basis) NOVA SCOTIA NS1 Up to $500,000 Up to 75% of the principal of the loan for regular sectors; up to 90% for special financing streams NS2 $5,000 - $25,000 ONTARIO O1 Case specific $500 - $5,000 Class A non voting preferred shares O2 Up to $15,000 O3 Up to $15,000 O4 Up to $75,000 (non-profits only ) O5 Up to $150,000 (non-profits only ) QUEBEC Q1 $50,000 - $3 million $50,000 - $3 million $50,000 - $3 million Q2 > $200, 000 > $200,000 > $200,000 Q3 Up to $50, 000 Q4 $20,000 - $50,000 $20,000 - $50,000 Q5 FES: Up to $50,000 FLI: Up to $125,000 FES: Up to $50,000 FLI: Up to $125,000 Q6 > $500,000 > $500,000 > $500,000 Q7 Up to $500,000 Up to $500,000 Up to $500,000 Q8 $50, 000 - $1.5 million Q9 > $50,000 > $50,000 > $50,000 Q10 Up to $150,000 Q11 Up to $500,000 Q12 Up to $125,000 Q13 Up to $50, 000 0 - $50,000 Q14 > $500,000 > $500,000 Q15 > $500,000 Q16 Up to $50,000 Up to $50,000 Q17 > $50,000 > $50,000 > $50,000 SK1 Up to $50,000 SASKATCHEWAN Leasingpurchase Agreement 7
TABLE 2 ANALYSIS: FINANCIAL PRODUCTS OFFERED BY EACH PROGRAM In terms of the kinds of financial products offered, table 2 shows a greater focus on debt financing than on equity financing. Loans are the most commonly offered financial product with 36 of the included funds offering loans. 13 funds offer loan guarantees. 17 funds offer grants to co operatives, but grants are generally quite small in size (with only three outside of Quebec with limits exceeding $20,000, two of which are exclusively for charitable and not-for-profit organizations) and grants typically do not provide ongoing operational funding. There are not many options available for equity investment with only 11 funds offering preferred shares financing and six of these funds are limited to Quebec. These findings point to a need for more equity investment options for Canadian co operatives. Table 2 also reveals a gap in national level capacity for financing larger borrowing needs. The lending limits of the national funds are for the most part capped at $50,000, which means any co operative requiring a larger amount in a province that doesn t have an accessible fund with higher limits, has to go to a traditional financing institution. Further, considering the variability in the priorities and objectives of Community Futures Development Corporations, only one national fund, the Canadian Alternative Investment Co operative (CAIC), with its $50,000 maximum for loans, clearly lends amounts over $20,000 to all sectors of co operatives. The viable provincial options for borrowing larger amounts are very limited or nonexistent in Alberta, Ontario, Saskatchewan, New Brunswick, PEI and NFLD. 8
TABLE 3: Stage of Business Development Funded by Sector Table 3 All Co-ops Pre-startup National: N3 Quebec: Q3, Q4, Q5, Q8, Q12, Q13, Q15, Q16 Other Prov./Territories: A1, M2, M3, M4, SK1 Startup National: N3, N4, N5, N6, N8, Quebec: Q1, Q2, Q3, Q4, Q5, Q6, Q7, Q8, Q9, Q10, Q12, Q13, Q14, Q15, Q16, Q17 Other Prov./Territories: A1, AR1, BC2, BC3, BC4, BC5, M1, M2, M3, M4, M6, NB3, NB4, NS1, NL1, O3, SK1 Consolidation and Expansion Recovery Business Succession National: N3, N4, N5, N6, N8, Quebec: Q1, Q2, Q4, Q5, Q6, Q7, Q8, Q9, Q10, Q11, Q12, Q13, Q14, Q15, Q17 Other Prov./Territories: A1, AR1, BC1, BC2, BC3, BC4, BC5, M1, M2, M3, M4, M5, M6, NB3, NB4, NS1, NL1, O3, SK1 Quebec: Q11, Q12, Q13, Q14, Q17 Other Prov./Territories: A1, AR1, M6, NS1 National: N3, N6, N8 Quebec: Q1, Q2, Q5, Q6, Q8, Q10, Q11, Q12, Q13, Q15, Q17 Other Prov./Territories: A1, AR1, BC5, M1, M2, M3, M6, NB4, NS1 Targeted Sectors Targeted Populations N1, N2 N7 NB1, NB2 N1, N2 NS2, O1 N1, N2 NS2, O1 NB1, NB2, O2 NB1, NB2, O2 Non-profits Only N1, N2 N1, N2 O1 9
TABLE 3 ANALYSIS: STAGE OF BUSINESS DEVELOPMENT FUNDED BY SECTOR Note: Table 3 and Table 4 organize the coverage of the eligible stages of development and financing needs by sector, demographic and not-for-profit status restrictions on applicant eligibility to distinguish funds that are open to all co operative from those with restricted eligibility. The targeted options include: worker co operatives (N1, N2, O1), local/ organic food /agriculture enterprises (NS2, O1), francophone co operatives (NB1, NB2, O2), aboriginal co operatives (N7) and not-for-profits only (). Table 3 shows there is a fairly strong focus on meeting the needs of co operative startups and co operatives in an expansion and consolidation stage of development; only four funds exclude start ups and three exclude expanding co operatives. Outside of Quebec, co operative adapted financing possibilities for the higher risk stages of pre-startup and recovery are much more limited. No national fund prioritizes support for co operatives in a recovery phase from all sectors and only one national fund, the Co-operators Co operative Development Program, will finance pre-startup stage development for all sectors of co operatives. Of the 14 funds that were identified as being open to financing pre-startup needs for all sectors, eight are limited to Quebec and three to Manitoba, which means the options for the rest of the country are extremely limited. The co operative focused options for helping non-worker co operatives outside ofa Quebec, Nova Scotia, Alberta, Arctic, Manitoba and Ontario (non-profits only) to recover are nonexistent, which increases the likelihood of struggling co operatives shutting down rather than finding a viable solution for recovery. The co operative development financing landscape in Canada needs to provide viable financing options for co operatives in all stages of business development and new financing tools developed through a National Co operative Investment Fund can help ensure this happens. 10
TABLE 4: Financing Needs Funded by Sector Table 4 Pre-startup Startup Tangible Capital Assets Consolidation and Expansion Recovery Business Succession Funding for Co operators Member Shares Buyback 2nd Tier Co operatives All Co-ops National: N3 Quebec: Q3, Q4, Q5, Q8, Q12, Q13, Q15, Q16, Other Provinces/Territories: A1, AR1, M2, M3, M4, NL1, SK1 National: N3, N4, N5, N6, N8 Quebec: Q1, Q2, Q3, Q4, Q5, Q6, Q7, Q8, Q9, Q10, Q12, Q13, Q15, Q16, Q17 Other Prov./Territories: A1, AR1 BC2, BC3, BC4, M1, M2, M3, M4, M6, NB3,NB4, NS1, NL1, O3, SK1 National: N5, N6, N8 Quebec: Q1, Q2, Q3, Q4, Q5, Q6, Q7, Q8, Q9, Q10, Q11, Q13, Q15, Q17 Other Prov./Territories: A1, AR1, BC1, BC2, BC3, BC4, BC5, M1, M2, M4, M5, M6, NB4, NS1, NL1, O3, SK1 National: N4, N5, N6, N8 Quebec: Q1, Q2, Q4, Q5, Q6, Q7, Q8 Q9, Q10, Q11, Q12, Q13, Q14, Q15, Q17 Other Prov./Territories: A1, AR1, BC1, BC2, BC3, BC4, BC5, M1, M2, M3, M4, M5, M6, NB3, NB4, NS1, NL1, O3, SK1 Quebec: Q11, Q13, Q14, Q15, Q17 Other Prov./Territories: A1, AR1, BC5, M6, NS1 National: N6 Quebec: Q1, Q2, Q4, Q5, Q6, Q8, Q10, Q11, Q12, Q13, Q15, Q17 Other Prov./Territories: A1, AR1, BC2, BC3, BC4, BC5, M1, M2, M3, M6, NB4, NS1, National: N3 Quebec: Q9 Other Prov./Territories: AR1, BC4, NS1, NL1 Quebec: Q1, Q9 National: N5 Quebec: Q1, Q7, Q8, Q9, Q17 Other Prov./Territories: AR1, M2, M3, NS1 Targeted Sectors Targeted Populations N1, N2 N7 NB1, NB2, O2 N1, N2 NS2, O1 N1 NS2, O1 NB1, NB2, O2 NB1, NB2, O2 Non-profits Only O5 NS2, O1 NB1, NB2, O2 N1, N2 N1, N2 O1 N1 N1, N2 O1 NB1 O5 11
TABLE 4 ANALYSIS: FINANCING NEEDS FUNDED BY SECTOR The coverage of core co operative financing needs in Table 4 reflects the results in Table 3. The majority of funds will finance startup, tangible capital assets, and consolidation and expansion needs and over half of the funds will finance business succession needs. The options for financing pre-startup and recovery needs are considerably more limited. Outside of Quebec, the capacity for co operatives from all sectors to obtain financing for recovery needs is very limited with no national funds and only five provincial or territorial funds (in Alberta, Arctic Region, British Columbia, Manitoba and Nova Scotia) focusing on providing this support to all sectors of operation. Outside of Quebec, only one national fund and four provincial /territorial funds have provisions for providing funding for 2nd tier co operatives or funding for co-operators for all sectors. The option for member shares buybacks in the case of a co operative undergoing liquidation or requiring assistance in repurchasing the shares of a departing member is currently only available in Quebec. CONCLUSION The findings in this report show that the currently available co operative adapted funding options in Canada do not sufficiently cover the range of geographic areas, financing needs and stages of development required to fully support and stimulate development in the Canadian co operative sector. The significant provincial and territorial disparities in financing prioritization and capacity shows that leaving the provision of co operative development financing largely at the provincial /regional level results in an uneven capitalization landscape with some heavily under-prioritized areas. The sector has the knowledge and the capacity to change the situation as co operatives and mutuals are one of Canada s leaders in the financial sector with $370 billion in assets and a volume of loans that equals close to 16% of Canada s GDP. The issue is more about improving the availability of financial support so that co operatives across Canada of varying sizes and sectors of operation can have the financial support necessary to become or remain viable co operative enterprises in the Canadian economy. Facilitating a better range of financial products at the national level through a National Co operative Investment Fund can help fill in the current capacity gaps for the co operative sector. 12