(original version by Tree Bressen, Co-op member
2000-2007; revised 2015 by Tom Atlee)
This page is offered primarily for the information of other
co-ops who wish to set up their own revolving loan funds. Recently
we became a bit overwhelmed at the prospect of needing to find $170,000
of new loans in two years and we decided to seek out sympathetic
financial institutions to replace some or all of the personal loans
in our fund. The fact remains that we have continued this fund for
more than a dozen years and you may crate one that lasts for decades...
See the 2008 Investor
Packet we used in our 2008 round of refinancing. Some of it,
like the specific housemates described, is dated, but most of it
still reflects who we are and how to describe your co-op to potential
investors. If you wish to invest in Walnut Street Co-op,
contact us at the addresses or phone number above. We contine to
welcome low-interest loans.
= = = = =
Community Revolving Loan Funds are an amazing tool. When we converted
our house to cooperative ownership, no bank was willing to offer
us a mortgage. Out of necessity we searched for alternatives, and
succeeded in purchasing our 9-bedroom home in Eugene, Oregon thanks
to approximately 20 friends who invested in our co-op with private
loans. This is a fantastic model for alternative financing, a do-it-yourself
empowerment that shifts power away from conventional institutions,
toward creating a better world. This description is written to make
the knowledge our co-op gained from creating this fund available
for other groups to benefit.
We have a contract with each lender-investor
(we prefer the name investor, since they are at least investing
in our social experiment and change work, and most are earning interest,
as well). This contract specifies how much money is being invested,
for how long, at what interest rate, and any other terms. Our current
parameters are a $5,000 minimum investment, 5 year minimum term
(before repayment is expected), and no more than 4% interest. We
aim to be flexible, however, and every contract is a bit different;
for example, one investment required us to maintain an advisory
team. Our investors have been very generous with us: some invested
at 0% interest, others at 2–-3%; also some were able to commit
for 10–-20 years. We offer a way for people to invest in alignment
with their values and our investors appreciate that.
Most of our investments have been in the range of $5,000–-20,000,
although we have regularly had one loan of $100,000-190,000 as well.
Of course, your experience will differ.
Most of these investment loans are amortized at 20-30 years, which
makes the payments affordable. If you are new to this scene, amortization
means that the payment calculations are stretched over a really
long time. That's how people of limited means are able to buy something
big like a house. Thirty years is a typical amortization for a standard
home mortgage from a bank. However, unlike a bank, most individual
lenders cannot predict the course of their lives 30 years ahead
and therefore are not prepared to commit their assets for that long.
So instead, the way our investments work is that we make small payments
during the 5-10 years of the term, acting as if it were a 30-year
loan. But then at the end of the 5-10 years, we have to pay the
entire remaining balance due; this is called a balloon payment.
That means that every 5 years our community goes through a refinancing cycle.
We ask each lender whether they'd like to turn the balance due on
their investment back into the fund to invest in us again (called
"turning over their loan"), or whether they want their
balance pald back. We then replace all the investments that people
want repaid, either with money from new investors or with increased
investments from existing lenders. This is somewhat risky, because
if we were unable to find adequate new financing we'd have to sell
our property to repay the investments. However, that risk seemed
very worth it to us, and until very recently (2015) we were reasonably
confident in our ability to do the refinancing. If a co-op can sustain
the energy, they can be encouraged by the fact that they were able
to do it the first time around, and over time they will likely become
an even more attractive investment because their community will
have more equity in the property and a proven track record of repayment.
With all but the biggest of our loans our payments are quarterly
rather than monthly, to reduce paperwork.
With the exception of our one or two largest investments, the investments
to our co-op have been "unsecured". That means they are
not officially attached (with a lien) to our property in county
records, in the event that the co-op dissolves and the house is
sold. This is partly because we wanted all of our investors beyond
the one or two truly large ones to share an "equal second" position:
meaning that if the house was sold and the sales income wasn't enough
to pay back all the investors, everyone would get a proportion equal
to the portion of their investment, to be fair. But when investments
are secured with the property, they get priority in the sequence
in which they were recorded with the county (or as per their loan
agreement or promissory note), so that all of A's investment is
paid off before B gets anything. In order to give everyone an equal
position we would have had to form a whole separate legal entity,
and even then the lawyer we talked to wasn't sure it was doable.
Also, having 20 separate investments attached to a property is very
complicated, especially when the investors change over the years.
So instead, our investments are unsecured, and the contract with
each investor explains that they are in an equal second position
with other investors. Over time, however, we have agreed to individual
contracts that give second or even third position to other specific
On some of the investments, co-op members or friends have signed
as personal guarantors. That means that if the co-op fails to make
payments, each of those guarantors can be held responsible for the
entire remaining balance of the investment. But even with that,
what it really comes down to is that this whole community revolving
loan fund deal is based on trust. Our lenders understand that we
are committed to being in integrity with them, and that while we
don't expect our co-op to fall apart, if it does we will do our
utmost to fulfill our financial obligations. If the co-op dissolves,
outside investors get paid in full before any co-op residents get
paid anything. Because the value of our property has been estimated
at $200,000-$500,000 more than our total loan burden, it is extremely
unlikely that we'd be unable to repay all the investments even if
we did have to sell the property.
Our investors come from a variety of sources. Some are active folks
in the intentional communities movement who believe in creating
more intentional communities. Some are personal friends who felt
moved to support a particular individual here. Some are supporters
of a wonderful non-profit that lives here, the Co-Intelligence
Institute. We also received support from several organizations
associated with the communities movement.
We attend to our relationships with our investors; they are our friends and not just a source of financing. We strive to be honest with them, offering genuine appreciation and practical information without distortion or descent into puffery. We send them a quarterly newsletter along with their checks, explain to newer housemates who they are as people, and have occasionally visited them and some of them have visited us. Our investors are a valuable part of our wider community and we are very grateful for their continued support.
When we started this fund, we created a beautiful, well-written packet that explained our project to prospective lenders, and we revise it for each new reinvestment period. Click here to download a pdf of our most recent version. The packet includes:
- A vision of what we are doing and why it matters
- History of our project and community
- A description of who we are, how we live, and how we contribute to the world
- Biographies of the core group / board members
- An explanation of what a co-op is and what type of community we are, and our place in the larger co-op / intentional community movements
- Testimonial letter from a satisfied investor
- Photos of the house (interior and exterior, with co-op founders in some of the pictures)
- Financial information—financial report, budget, list of current investors, their quarterly interest rates and payments, and when they need to be repaid
- Form for enrolling support (investments, donations, and more)
- SASE (self-addressed stamped envelope)
If you are setting out to create a Community Revolving Loan Fund for your intentional community or other project, our core advice is as follows:
- Believe in what you are doing and share your passion.
- Have everyone in your project make a list of everyone they know that has $5,000 or more (or whatever your minimum investment is) that they might be able to invest. Hopefully you will be surprised by how many names are on the list. You won't end up asking everyone on that list, but it gets you started seeing the possibilities.
- Keep firmly in mind that you are offering investors a service and an opportunity. You are helping them to live out their values in the world. At 3% interest you would be providing a higher profit than a savings account and a more reliable profit than many other investments, especially in today's economy.
- It's all based on trust. Some people invested in us based on one conversation without ever seeing the packet, simply because they believed in the person asking. At first we were surprised by this, but then came to understand that trust is the central element in a investor's decision. Be honest, transparent, and above all always act with integrity.
Click here to see a sample contract.
Other possible financing sources for intentional community land acquisition
- Institute for Community
Economics (ICE): Their bureaucratic wheels turn slowly and
they require huge amounts of documentation, but they can lend
over $100,000 if your project is structured as a land trust or
limited equity cooperative.
- PEACH (Protected
Equity Accessible for Community Health): The member communities
of the Federation of Egalitarian
Communities (FEC) operate their own health risk fund, a portion
of which is available for investment in intentional communities.
To learn about funding opportunities with PEACH and FEC, see their
- Shared Capital Cooperative
is a national cooperative founded in 1978 whose purpose is to
make loans to co-ops and is, itself, a revolving loan fund. They
have worked well with us.
- NASCO (North American Students
of Cooperation) lends money to cooperatives that fit current
lending parameters, through their
- In theory the National Cooperative
Bank should be a source of financing for projects like this.
Back in 2008 we were told we were too small for them to even consider.
However, if you are converting an apartment building in New York
to a co-op, they'd probably be interested.
- You can try asking other intentional communities and intentional
community organizations, particularly ones in your region.
Walnut Street's Community Revolving Loan Fund was inspired and assisted by a
similar entity at Los Angeles Eco-Village. Their fund is outlined at the LAEV website.
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