Learn more about what Community Bonds are and the benefits to this innovative financing method.
Community bonds are defined as:
A social finance tool that can be used by charities, non-profits and co-operatives to finance socially and environmentally impactful projects.
Similar in many ways to a traditional bond, they are an interest bearing loan from an investor, which has a set rate of return and a fixed term.
Why finance your project with community bonds?
Community bonds put the power in the hands of the issuer to define the terms of the bond (price, interest rate, duration. etc.) that work for their project, their finances, and their community of investors. They increase the predictability and efficiency of obtaining financing.
A typical community bond campaign raises funds in 6 months, making it a faster way to secure funding than fundraising and grants. While donations and government funding may come in stages and be tied to specific expenses, community bonds provide access to a lump sum of capital that can be deployed immediately, and can help to bridge other financing sources.
Community bonds are creating a new marketplace for investors to make a return while also doing good. While the majority of bonds we manage are held by everyday people, they have also become popular among community foundations who have earmarked funds for impact investing and local businesses looking to make a social impact.
Impact investing, and particularly local/place-based investing, is a rapidly growing market and the pool of capital is immense. Every campaign we have supported to date has sold out. In 2020, despite the pandemic, Tapestry supported in raising $18.3 million in community investment.
Community bonds create an opportunity for deep and meaningful community engagement. When a community member stands to financially benefit from a project, they suddenly become a cheerleader and ambassador. Investors get a double benefit – the financial return and a stake in shaping their own community.
Community bonds are priced to allow maximum participation. We have seen bonds priced as low as $250, as well as caps placed on investment to ensure widespread involvement. An average community bond campaign engages 90 investors for every $1M raised.
Community bonds are an extremely scalable funding solution. On average, 70% of investors choose to reinvest in a future project rather than redeeming their bond. This means that once an issuer has completed one campaign, they will have a pool of capital that they can continually deploy for future projects.
Community bonds build local economies. They allow capital to flow back into the hands of everyday citizens and residents.
Why not allow your supporters to benefit financially rather than a bank? Community bonds allow you to align your organizational values with the way you finance your projects.
In our experience of managing over $80 million in community bonds, we have found that having community bond investments backed by an asset increases investor confidence, and hence the success of the campaign. In past projects that we have worked on, these assets have ranged from solar panels to buildings.