Remarque : les informations contenues dans ce guide ne constituent en aucun cas des conseils juridiques, financiers ou d'investissement. Les émetteurs sont invités à solliciter l'avis d'un conseiller juridique et financier indépendant avant de procéder à toute offre de titres.

One of the questions we get most often: “Community bonds sound great! But where does the money to repay investors come from?”

For potential community bond issuers, understanding whether your project has the right revenue model is essential. Not every organization is equally suited to debt financing and not every source of income is stable enough to support repayment.

For those with the right combination of a predictable revenue model, a compelling mission, and an engaged community, bond financing can be transformative.

Why the source of revenue matters

The community bond model creates binding, long-term obligations between the issuer and their investors. That means the issuer commits to making interest payments and repaying investors at maturity according to pre-determined terms—whether revenue targets are met or not.

To do this, issuers need revenue that is predictable from year to year, diversified enough to withstand shocks, and aligned with the asset or project being financed. Investors are often drawn to a community bond because of the issuer’s mission, but it’s not a donation—they need to feel confident that repayment is realistic.

Most suitable community bond repayment sources

1. Rental or lease income
One of the strongest revenue sources for community bond-financed projects is contracted rental income. This is common among organizations financing real estate projects, like affordable housing, coworking spaces, or cultural venues. Some examples could include residential rents from affordable housing units, commercial leases in a mixed-use property, and office or event space rental fees.

This model works because it creates recurring monthly cash flow. It’s a clear plan linked directly to the asset financed by the bonds, which makes it easy to understand and appealing to investors.

2. Membership revenue
Recurring membership fees are another strong fit, especially for cooperatives, associations, or recreation organizations. This category could include co-op member fees, program memberships, or shared service fees.

Similar to rental income, this model is supported by predictable recurring payments which can grow over time. And a loyal member base could become investors who can see and experience first-hand the social return on their investment.

3. Earned revenue from established operations
Some nonprofits and co-ops run businesses aligned with their mission to earn revenue that funds other mission-based activities. Some examples include food co-ops, employment-based social enterprises, or retail stores. These kinds of enterprises are best-suited to community bonds when they have several years of positive experience operating with solid cash flow.

This works because revenue is linked to active customer demand, there’s potential for growth, and investors can see a clear link between acquiring assets and growing the enterprise.

4. Government contracts or service agreements
Many nonprofits and charities receive revenue through multi-year contracts with government agencies to deliver public services like childcare, employment services, settlement services, housing support programs, or community health programs.

The funding is often stable and recurring, and if aligned with bond repayment terms, could allow the issuing organization to take on a capital project and grow their community of supporters through a bond raise. However, it’s important to assess renewal risk—if funding depends on annual approvals or is subject to policy shifts, investors will want to know about that uncertainty.

Sources to approach with caution

1. Donation
Annual fundraising campaigns, major gifts, and one-time donations are the backbone of many charities and nonprofits. If an organization has a strong track record of sustained annual donation campaigns, this revenue could potentially support a portion of bond repayment.

However, donations aren’t contractual and can fluctuate, so it’s important that projections are conservative. As a result, donations should generally not be relied upon as a primary source of debt repayment and are better viewed as supplementary support.

2. Grant funding
Most grants are restricted, meaning that the recipient must use the money for a specific project or purpose—which very rarely includes debt repayment. Even if it does, there could be a risk of non-renewal after the grant term ends, if it’s a project grant and not multi-year funding.

Zooming out: The capital stack

Grants and donations are important sources of funding for charities and nonprofits and most community bond issuers also receive this kind of support. Even if they don’t work as repayment sources for community bond debt, they are often important parts of an organization’s capital stack—a term used to describe a combination of funding sources for a project.

For a sustainable long-term plan, most organizations should have a balance of repayable and non-repayable funding, which brings down the overall cost of capital.

Key questions to ask

If you’re considering a community bond raise, first examine:

  • Is revenue recurring or one-time? Recurring revenue is generally a stronger fit for bond repayment, since it’s predictable and long-term.
  • How diversified is revenue? Heavy dependence on one source could increase risk, especially if it’s also sensitive to economic conditions or policy shifts.
  • Does cash flow timing match bond payments? One benefit of community bonds is that you can plan a repayment schedule based on your revenue projections, but it’s important to know upfront that you will bring in revenue within a timeframe that would be reasonable to investors.
  • Can the repayment plan be clearly explained to investors? A simple revenue model that clearly shows how investors will be repaid and is tied to the project’s positive social impact is often most compelling.
  • Is there operating surplus after bond repayments and core costs? Community bond debt should not crowd out the delivery of your mission!

At Tapestry, we work through these important questions and more with organizations considering a community bond raise—helping them gain a clearer picture of their project’s financial position, regardless of whether they move forward with community bonds immediately.

En savoir plus sur nos services