1.7 Institutional Investment

Community shares can provide the foundations for building a robust capital structure in a society. Some societies may be able to raise all the capital they require from individual members and by reinvesting their surpluses. But, more often than not, community shares act as a lever to access institutional investment. This investment might be in the form of grants, loans or equity. The institutions might be public funding bodies, social investment specialists, banks, ethical investment funds, charities, and corporations, including other societies.

Institutional investors often take comfort from community shares. Community shares demonstrate community support for the enterprise, and its services. It provides some financial security for institutional lenders, knowing that they are higher up the list of creditors than shareholders. It is proof of the long-term commitment by members to make a success of the enterprise and to see it through any difficult or challenging period.

Institutional investment is usually welcomed by societies, subject to concerns about the impact it might have on members’ investment and the dangers of over-dependency on a single source of investment. These concerns depend on both the nature and the scale of the investment. The focus here will be on three types of institutional investment - grants, loans and equity.

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