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Notes on funding options for certain types of Real Bread enterprise.
The growing community food enterprise movement, which is reconnecting people who buy food with the people who produce it and works to ensure any profit benefits the local community, needs bakers.
The problem is – how do you finance a commercial scale bakery?
In the most practical sense, community shares are a way of raising money from local people through the sale of shares or bonds in order to finance enterprises that will benefit the local community. communityshares.org.uk defines such schemes as: ‘The sale, or offer for sale, of more than £10,000 of shares or bonds to communities of at least twenty people, to finance ventures serving a community purpose.’
Unlike charitable fundraising, many community share schemes aim to pay interest or dividends to investors. Such payments may be in cash or in kind, and so a bakery might offer bread or baking skills training in lieu of money.
A key point to remember is that, as well as the good times, everyone involved in a community share scheme shares the risks to some degree as well.
Community shares seem particularly appropriate for Community Supported Bakeries (CSB), co-operatives, social enterprises, and other bakeries with the objective with social benefit at the core of their business model.
Here are some examples of enterprises that have used community shares to help raise the capital they needed to allow them to bring Real Bread back to the hearts of their local communities.
A Community Supported Bakery run as a worker-owned co-operative, The Handmade Bakery has run two community share offers to fund permanent premises. One was in the form of a Bread Bond scheme, which gave investors a return of a weekly loaf of Real Bread. ‘This is £2000 of loan stock taken out over 3, 4 or 5 years. We pay 6.25% interest per annum (£125 per annum)’.
The second was a Course Bond, mainly aimed at people not so local to the bakery. ‘This is £1000 of loan stock taken out over a three year fixed term.’ The scheme pays 4% interest per annum (£120 over three years) in the form of one of baking courses. Investors can choose to attend the course at any stage during the three years. In all, The Handmade Bakery raised around £40,000 from community shares.
This Community Supported Bakery was set up in 2012 as a community interest company on Whitmuir Organic Farm. They sell their bread through the Whitmuir farm shop and its restaurant, as well as at two local farmers’ markets, a range of shops in the local towns and Edinburgh.
BreadShare’s community share scheme takes the form of Loaf Loans, from which ‘investors receive a 7.5% p.a. return on their Loaf Loan in the form of bread vouchers. Most vouchers will be exchanged for bread right at the bakery door, making a real connection between BreadShare and its supporters’.
The BreadShare team are very happy to be contacted to share their continuing journey of setting up a Community Supported Bakery as a community interest company, and are always keen to hear from people who’d like to volunteer.
This community-owned social enterprise was established to ensure an independent Real Bread bakery was kept at the heart of the community on Dunbar High Street. A year after a family bakery closed due to retirement, Dunbar Community Bakery was officially registered as a community co-operative, spearheaded by Sustaining Dunbar.
Community shares were offered, priced from £20 to £100 each. By August 2012, the bakery had over five hundred community shareholders who all receive a 10% discount on purchases made in the bakery.
Albany, New York
The founders started talking about setting up Community Supported Bakery in September 2010 and launched their first community shares that winter. The model uses shares similar to that of a box scheme where shares were available on a seasonal basis, starting at $6.00 per week. Individuals purchase a share of bread and baked goods at the beginning of the season for weekly pick-up, from two locations, having already chosen the products they’d like to receive.
‘Members are benefitted with larger specialty loaves than those sold retail, a reduced price on daily sandwich breads, a unique view of the evolvement of Nick's skills and talents, and greater involvement with those in our community who care about consuming Real Bread!’
They also offer sponsored shares for small, community resident based charities to enable them access a full share of weekly healthy bread at a discounted rate. As well as selling bread and sweet treats they also serve breakfast and lunch, supporting neighbouring farmers and local small food producing suppliers.
A relatively recent name for a long-established way of financing an enterprise is crowd funding. In short this involves many people clubbing together to invest in the project. The funders might or might not be the customers/clients/users of the enterprise - e.g. they could be members of a worker-owned co-operative CSB, or people the other side of the planet who believe in your work. This form of investment also applies to bakeries other than CSBs.
Wikipedia has a fuller definition here.
Some ways to arrange crowd funding:
Shop around to find the crowdfunding provider that suits you best: the charges and levels of support they will provide will vary. Some only trigger donations if you hit your target, while others may give you access to everything that’s been pledged, regardless of whether or not you do.
Crowd funding websites include:
Raised £18,725 from 494 backers through Kickstarter
Leeds Bread Coop
Raised £8,690 from 114 backers through People Fund It
The Thoughtful Bread Company
Raised £55,000 from 34 backers through Crowdcube
If you have had success in securing crowd funding for your Real Bread enterprise we'd love to hear from you so that we can use you as a case study to inspire others. Please contact us.
Some sorts of Real Bread enterprise might be eligible for grant funding or particular types of loans. Usually this will require yours to be a not-for-profit and/or social enterprise.
This is a specialised provider of finance to social enterprises. Social enterprises are defined as businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or community, rather than being driven by the need to maximise profits for shareholders and owners. Loans are available for Commercial property renovation or purchase, equipment purchase, growth or acquisition and working capital. The average size of Big Issue Invest's loans are around £200,000. The minimum loan size is £50,000. Each loan is tailored to each enterprise's stage of development and risk profile, as well as being focused on scale-up.
Applications can be submitted at any time.
The Co-operative has recently launched a dedicated fund to support communities that want to raise investment using community shares. To apply you need to have a detailed business plan, agreed rules of your society and a copy of your share offer document if possible. It's also important to be aware that they expect you to have been in touch with one of the organisations that offer tailored advice on how to work with community shares such as The Plunkett Foundation, Locality, Co-operatives UK, The Co-operative Enterprise Hub or Baker Brown Associates. The maximum investment is £50,000.
Website from the National Council of Voluntary Organisations (NCVO) and The Office for the Third Sector (OTS). Offers comprehensive information about national, local and regional government funding, national, local or regional charitable funding, and EU funding.
Offers small grants ( £250 - £5,000, with a maximum total of £5000 over 3 years) to non-profit making, volunteer-led community groups, which have been running for 12 months or more, and which have an income of less than £30,000 a year. This is a three-year programme running from 2008 -2011 offering grants that can be used for general activities, projects or equipment. The funding is from the Office of the Third Sector and is managed nationally by the Community Development Foundation (CDF)
Charity founded by former Greggs plc chairman, Ian Gregg with the aim of 'putting something back into the communities where there are Greggs shops and where customers and employees live.' Gives grants to organisations with charitable objectives in the North East of England.
Quartet Community Foundation
'The main focus of Quartet Community Foundation is to change people's lives for the better across the West of England. We do this by enabling a wide variety of donors to fund projects that make a difference where people live and work.'
Is a charity which supports social entrepreneurs - people with vision, drive, commitment and passion who want to change the world for the better. They offer a complete package of funding and support, to help these individuals make their ideas a reality.