Financing Your Co-operative

Under the Ontario Co-operative Corporations Act, co-operatives can incorporate in one of two ways: with share capital and without share capital. Each structure offers options and benefits for raising money or carrying on operations. The co-operative's purpose and financing requirements will determine the correct choice. Click on one of the links below to learn more about financing your co-operative - and check out the video on Financing a Co-operative: A Legal Perspective!


Determining Financing Needs

Before making the decision about share structure, a group should try and answer the following questions about their business and their financing needs: 

  1. Will the co-operative need to purchase equipment, land or other assets before being able to start operations?
  2. Will the co-operative have to purchase supplies or maintain inventory on an ongoing basis?
  3. Will the co-operative need working capital during start-up or in the early project stages?

In many cases, both a share structure and a non-share capital structure may be able to provide the co-operative with the necessary funds. Each choice carries benefits and drawbacks that may make different options available as time goes on, or restrict future choices. Some banks and financers may not be comfortable with the non-share capital structure, which may limit the ability of the co-operative to raise money.

The decisions around share structure and corporate structure can be complex, and will require a clear idea of the co-operative's purpose and business plan. A Co-op Developer, lawyer or accountant (preferably one who is knowledgeable about co-operatives) can help advise a group with making the choice of structure. Check out our Co-op Service Providers page to find a consultant who is familiar with the co-operative business model!

For more information on Share Capital, Financing and other topics, check out our FactSheets in the Tools & Resources section.

Developing a Business Plan

Acquiring financing requires developing a business plan that outlines the co-operative's financial situation or the proposed financials. A business plan contains standard information about the co-operative or the proposed project. Business plans can be presented to commercial lenders to help them understand your business and properly assess your needs and their ability to help you. A business plan should identify:

  • r\Revenue or potential revenue associated with the project or the co-operative’s operations – usually through the inclusion of financial statements or pro forma financials
  • Key personnel involved in the co-operative
  • Timelines and status of the project
  • Risks associated with the project and how the co-operative has addressed them
  • An assessment of the market that the business is operating in and the co-operative’s ability to succeed in this market (i.e., their competitive advantage)

The business plan is a tool that can be used to demonstrate that the co-operative has the skills and ability to move forward successfully. It can also show a lender or potential investors that the co-operative can manage the project and can mitigate any risks that might occur. OCA can assist your organization in writing a business plan, or link you to a Co-op Developer or other consultant who can help you. Resources are also available online, but be sure to always select a website from a company or organization that you recognize.

Financing through Other Sources

There are a number of ways a group can seek financing for their co-operative business venture, including securities (offering statements), debt financing, grants, and government subsidies/support. 

1. DEBT FINANCING. In addition to the ability to raise money from the membership and community investors, co-operatives can also take on debt financing from financial institutions like credit unions or banks in order to finance their projects and operations. This can include obtaining a mortgage or loan to purchase property or equipment, opening a line of credit for the co-operative to use, or other types of shorter term loans. The ability of a co-operative to obtain financing of this type will depend on several factors, including:

  • The available equity or collateral that the co-operative can bring to the table
  • The perceived risk of the investment or the business of the co-operative on the part of the financial institution
  • The amount of money required

2. GRANTS. Some co-operatives - usually only those operating with not-for-profit or charitable status - can also access grants from charitable foundations or government agencies like the Ontario Trillium Foundation. There are some granting programs that are open specifically to co-operatives, regardless of their tax-status.

Grants are usually project-based and provide funding for a finite period of time. They usually do not provide ongoing operational funding, but may partially cover staff costs. Grants will generally require an application and approval process and not all applications will be successful.

3. GOVERNMENT SUBSIDIES OR SUPPORT. Some co-operatives are eligible to receive government funding that supports their operations. This can be the case with co-operatives that are providing a social service that is subsidized by the government, for example some not-for-profit housing co-ops or some child care co-ops.

4. OTHER FINANCING OPTIONS. Consider the Canada Small Business Finance Program or Community Bonds, Co-op Funders and Crowdsourcing as options.