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CP/CU sorority has to put more in

by Tony Patterson at Co-op Canada Accelerator

CP/CU sorority has to put more in

Co-ops were chanting their usual dirge about lack of capital at the last meeting of the all-party parliamentary caucus on cooperatives in June. They were told by the MPs —sympathetic MPs or they wouldn’t be in this caucus — to be conscious of the fact that co-ops are just one sector of many approaching government for financial assistance. “They would do well to market themselves better and develop more effective messaging,” according to caucus chair Mauril Bélanger.(at left in photo with fellow caucus members, from left, Brad Butt, Hélène LeBlanc, Djaouida Sellah and Marjolaine Boutin-Sweet).

What is this capital problem that co-ops are so sensitive to?  The problem isn’t that they can’t issue shares on the stock market. Stock issuance isn’t the way most business capital is acquired. Most capital is borrowed. Debt rather than equity is far the greater portion of business capital invested. In fact the problem for co-ops is less financial than it is attitudinal.

Why can’t co-ops borrow? It depends. If they’re very small and/or very new, a startup in other words, who’s going to lend to them? Just like all startup SMEs, they’ll have to tap family and friends and max their credit cards. There’s no other way and never has been until you get bigger and can go to a bank or a CU/CP – there’s not much to choose between them at this stage – where they’ll lend you whatever you can afford and are willing to give personal guarantees for. It’s the same for both corporate and co-op clients and nobody wants to comply, sign away life itself. But the passion of entrepreneurship as well as the lure of great profit will tempt more biz types than co-operators, for whom the risk-benefit ratio is less appealing. This is where the capital/credit bottleneck lies. Federated, Féderée, Agropur, Co-operators, Calgary Co-op, MEC, Desjardins aren’t suffering lack of capital. Are you hearing cries of capital shortages there? It’s the SME co-op that’s stranded and will continue to be, until the CP/CU sorority puts more of its money into its beliefs. Most credit unions owe their very life to one of the principles that guides the movement (#6, cooperation among cooperatives). Why shouldn’t it be up to these financial guardians of the movement to devise a way of valuing the co-op difference that makes it easier to borrow? I don’t say less risky, they must be prudent, but I do think it’s up to the movement to help heal itself and the nursing stations are well marked.

The guests at the June caucus meeting were from funeral co-ops. They reported “some issues around capitalization as credit unions and banks (including the Business Development Bank of Canada) have demanded 100% guarantees on loans. They have sought creative ways to find capital but what is needed is dedicated funding for start-up co-ops . . . they are discussing the idea of building a national fund.”

Building a fund among co-ops with a common interest makes good sense. Often, enthusiasm and engagement can be aroused more readily in a business community where communication naturally flows. As we’ve pointed out in another post, there’s no use waiting for the Canadian Co-operative Investment Fund. CCIF is either stalled or stopped, depending on who you can or can’t talk to.


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