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podcast: Everything you wanted to know about community bonds with Ryan Collins-Swartz

blog photo: Everything you wanted to know about community bonds with Ryan Collins-Swartz

Community bonds are an alternative model of financing for charities and nonprofits, that are repayable to investors, with defined interest terms. The bonds allow organizations to collect capital for projects and pay it back over time, like a loan, but you're enabling your community to support it instead of putting money back into the big bank.

Today’s guest is Ryan Collins-Swartz from Tapestry Capital. He helps organizations across Ontario raise community bonds, which are a powerful way for nonprofits and charities to finance capital projects by raising investments from their supporters. They allow citizens to invest locally in meaningful projects.

What is a community bond and how can it work for organizations?

Community bonds have been around for about 20 years and we've seen more and more success with them used by nonprofits and charities, but they're pretty much a way of borrowing money from your support network. So it's similar to a Canada savings bond, but it's the way a nonprofit or charity can borrow money from a bunch of different community members and use that money towards a capital project and then they pay that money back over time.

While community bonds are rising in popularity along with Impact Investing, they are different. A community bond is going directly to your community network and you can offer bonds as low as you want. The terms are set by you as the nonprofit or charity. So you could have bonds and so as to let's say like $500 or $1,000 and you're able to get a really wide range of investment from the people you know and the people who support you.

How does an organization know if this is right for them? What are some criteria that they should be thinking about in terms of when the community bond makes sense to help with their funding mix?

It's definitely not the right tool for all nonprofits. We think about the type of the project, the business model, the operating model for the nonprofit, and then also their community network of supporters.

At Tapestry around the office for the past couple of years we've thrown out the term iconic project. Something major for people to rally around. There's nothing that mandates what the funds can be used for. But if you're looking to, let's say have these bonds held in RSP accounts or TFSA accounts, they need to be mortgage-backed. And we find that when they're attached to a fixed asset, they give investors a lot more confidence in your ability to repay. And also like let's say in the case that something goes wrong, it's at least tied to like a tangible asset or building. And the second is just about like visibility. So people don't want to typically invest to keep the lights on or hire new staff. But something like a new building or new facility is something that investors can see, they can touch and they can point to.

In our sector where this differs from philanthropy is you pay this money back. This is not our money. This is leveraged money, this is money that we get to do something big and scale us up, but that it's not ours forever. That we have to have a business model to support paying that back. Can you talk a little bit about some of them, like what we need to think about to know that we're able to do that?

I think Cindy, it comes back to long term financial planning. So with the groups that we work with, we either build out a five-year or 10-year business plan.

I think a really big learning point or misconception is that there's not just one type of bond. And what we do at Tapestry is like we help you figure out how you want to structure your own bond. We're gonna raise let's say $1 million in a five-year bond, 5%, $1,000 minimum. We'd want to think about having a few types of bonds. Usually, we help groups go to market with two to three types. It's for two reasons that help you pay them back so you don't have one year in which you have $1 million to repay. And the second thing is that it makes it accessible to a wide network of your supporters.

Next, we look at the operating model. Let's talk about that in terms of what are some considerations looking at your operating model to know if this is the right type of financing for you?

We start by looking at your different revenue sources and to see what that mix is between earned revenue, grants, and philanthropy or donations. And the second thing is looking at what the impact of this new project is going to be. And that's often a challenge and a thinking exercise in itself. So for example, a CSI, how to think about, well, if we're going to buy this $6 million building, how many new people can we get? How much are they each going to pay in rent and how much do we have to repay it to the bank and to our bondholders?

Finally, let's talk about community, because I hear a lot, so I speak to a lot of organizations and it's very easy to get into a mindset of if we build that it will come and they don't always think about who that is and how they're going to engage people. So, what do we need in a community to know that this can be successful?

It's true that the community bond isn't necessarily the start of building a community. It's often the end. It's similar to someone doing a Kickstarter. It's not really the beginning of your business or your network. It's often like a combination point when your inner circle has seen you working tirelessly for a long time on something and then they support you.

I like to think that with the groups we work with, you have more community than you think. One of the things we do in the introductory workshop that we do with every nonprofit we work with is building out collaboratively a stakeholder map. And for a lot of groups, like the first five minutes is really difficult. So let's say this rowing club, the Argonauts who've wrapped up their successful $1.2 million bond campaign, they said, well, we have our members, our rowers, our juniors, our parents vote. When we had to like press them a little bit more, they always said, well like where do you get your boats from? Oh, Hudson Boat Company and they're long-time Canadian boat manufacturer. Okay. They're a potential investor. I'm like, who's where you're doing a $2 million revitalization in the club. Who's going to be leading that work? Oh, we're looking at this contractor and whose great grandfather was one of the founders of the rowing club actually like add them, add them to the list. So we started with five groups who they thought could be investors, ended up with the list that was like 40 plus.

And so like a couple of things happened is through the act of doing a community bond, they brought more people into the circle, which improves their operations and their organization, more impact. Also, their biggest revenue drivers renting out their banquet halls. So the more people who knew about them, who are part of it, the more people who joined the club. And the second thing was they went to their contractor after the bond campaign launched and three of the members from the contracting company each invested quite a fair bit into the bond project.

Are there any other considerations an organization should think about or caution? Cautionary tales that we should know?

Sure. I think it's a lot like in love where it's a lot about timing. It's all about timing. This introductory workshop we do with groups who are just thinking about community bonds. We've done about 20 of them in the past year and about eight of those groups have moved on to actually planning their community bond projects. About five of them figured community bonds wasn't right for them at this point and the rest of them are actually waiting for the right time for their capital project before the community bond because like you don't want to raise the money before you need to use the money.

But you don't want to raise it too early. You don't want to raise it too late. So it's kind of finding that sweet spot of like, how do we best leverage and that financing, so it's not sitting in a bank, but also how do you get it in time that you're not, you're not taking out loans to cover construction or financing in lieu of the bonds or an anticipation in the bond. So yeah, that's a good point.

We talked a lot about the strategic approach and how, you know, what are the considerations, but often we find with our organizations, there are some capacity and systems issues that need to be in place to be successful in undertaking new projects. Like how do you track the information? What kind of bank accounts do you need? How do you manage that? What are some of the systems that we need to think about that will help make launching the raising of the successful, but the management of other people's investments?

It's true like it is about systems. So upfront with the management at Tapestry, we actually provide the management services for all of the bonds, for the life of the bonds, for all the groups that we support as issuers. It's done on a very, very, very, very, very low cost and right now we have about $61 million in community bond investment across 4,500 different community investors. So we know that nonprofits want to raise the funds but don't necessarily want to be managing the funds and dealing with T-5's and accruing all the different bond types. We have our own team that takes care of all that. So you focus on doing your work and building an organization.

Resources from this Episode

The Good Partnership Guide CharityVillage Tapestry Capital - sign up to be notified of the next Community Bond Workshop!

You can also contact Ryan by emailing or

The Small Nonprofit is produced by Eloisa Jane Mariano

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