The cost of raising community bonds

Please note: The information in this guide does not constitute legal, financial, or investment advice. Issuers should obtain independent legal and financial counsel before proceeding with any securities offering.

Community bonds allow organizations to raise capital at lower interest rates than offered by most traditional lenders. This can make a difference when every dollar saved means more community benefit.

But interest paid to investors isn’t the only cost — there’s also staff time spent on the campaign and administrative and consulting costs (if you choose to raise with our support!).

Many financing pathways, including community bonds, incur costs outside of interest. It’s important to understand exactly what those costs are and whether the benefits outweigh them.

Here, we’ve broken down the costs associated with raising community bond capital with Tapestry’s support, plus a high-level comparison with other common financing pathways.

Tapestry’s fees

Of course, organizations don’t have to work with Tapestry to issue community bonds! But we do provide services that make the process easier.

We have a team of consultants who guide organizations through financial planning for the raise, consulting their community of potential investors, structuring their bond terms, and making plans for outreach to interested investors. We also coordinate any legal review with lawyers who are knowledgeable about the community bond process. Lastly, we have a team and a digital system that handle administrative work for the lifetime of bonds, like interest payments and tax slips.

Community bond issuers pay us for these services. We tailor our fees to the issuer’s specific project, calculating the hours the raise and ongoing admin will require from our team. The cost of legal review is included in our fees.

Fees for our consultation on planning a raise typically fall between 1% and 5% of the organization’s raise goal, with larger raises paying a lower percentage of their goal. Ongoing administration fees are typically under 1%. (It’s important to note that we do not charge based on a percentage, but rather a level-of-effort assessment. The percentages listed here are for illustrative purposes only.)

Our two-month Community Capital Readiness Program is more standardized, with the fee to participate set at $7,500 + tax.

Staff time & additional costs

With Tapestry’s support, launching and running a successful community bond campaign also requires staff time over several months. Typical activities include:

• Contributing financial details and inform financial modelling support by Tapestry to determine the debt the organization can carry, and to structure community bond terms
• Developing collaterals such as project briefs, presentations and business plans to support your campaign
• Hosting consultations to understand prospective investors’ appetite
• Reviewing offering documents (prepared by Tapestry) that help investors understand the opportunity and disclose any risks associated with your project
• Selling bonds, including hosting community events, digital marketing, responding to investor inquiries, and more — there are often other direct costs associated with hosting events (like food and venue rental) and advertising (e.g. paying for ads on social media)
• Engaging in investor stewardship and providing project updates once your raise target has been met

Here’s a breakdown of the time we expect issuers’ teams to spend during each phase of the community bond process:

Roles can be combined depending on team members’ skillsets — for example, a marketing or finance professional may be able to take on the project management role as well.

Some organizations have dedicated and knowledgeable volunteer board members who can complete this work, but those who plan to have staff members carry out a raise should consider their salaries in any cost/benefit analysis.

The benefits

For some organizations, particularly those with tight budgets, these costs are not justified by the benefits of community bonds, and a more straightforward, conventional loan is preferable. Running a sustainable community organization is complex work and requires careful weighing of costs and benefits — not every organization is able to commit the upfront costs and staff time required to run a successful bond campaign.

However, those who can tend to view these activities not simply as financing costs, but as investments in community relationships, visibility, and long-term organizational resilience.

That’s because raising community bonds expands the organization’s network of supporters, increases public credibility, and grows the organization’s capacity for financial planning. The process gets community organizations investment-ready, and can attract other kinds of financing or even non-repayable funding too. A well-structured community bond raise can also become a reusable financing framework for future projects, reducing costs over time.

And many organizations say the flexibility of the community bond model is the most important factor, making the upfront investment worthwhile. Organizations issuing community bonds set the terms themselves, rather than having to accept the terms offered by a conventional lender. That means they can choose repayment schedules that line up with their revenue projections and interest rates that are sustainable.

Financing options compared

Different financing mechanisms come with different costs, levels of effort, and benefits. Here are some of the key differences between community bonds and other sources of capital: