Bghc.org.uk

Loanstock
The Breaking Ground Housing Cooperative Ltd will be using the method of loanstock investment as a way to generate needed finance. Here is the basics about what loanstock is and how it works- from our perspective as the contracting organisation and for you as the investor.
What it is
‘Loanstock’ is the term we use to describe a system operated by the Cooperative to enable outside people, and members, to invest their money in the co-op and thus help it raise the finance it needs. Points to be aware of
Cooperatives are not ‘acting like a bank’. They do not offer advice and do not to take money on deposit. How it works – The Basics
The system is one of ‘fixed-term’ loans, for a set period of 5, 10, 15, 20 or even 30 years. Interest to the investor. At the end of the set period, the investor is paid back in full.
The full ‘principal’ amount is earning interest al the time, unlike a mortgage-type loan where this outstanding capital is gradual y being repaid. Thus, loanstock can be more expensive for the cooperative. Despite this disadvantage, loanstock is essential to privately financed co-ops, mainly through the legal ability to publicly promote it, this is a result of exemption from various laws that al ows Industrial and Provident Societies to advertise for investment. Since people are investing with the Cooperative directly, cutting out financial middlemen, the Cooperative can offer a rate of interest comparable to a deposit account. Supporters with the same ethic as the cooperative may be prepared to help the coop by taking a very low rate of interest on their loanstock.
How it Works – The details
The Cooperative ‘makes an issue of loanstock’ with a defined opening date and a closing date. Only in between these dates can the co-op accept money and issue the loanstock. Pledged money can only be banked after the opening day of loanstock issue. Once the money is received in the account, each loanstock holder will be issued with a loanstock certificate. These are individual y numbered and signed and 'sealed' in the presence of the Secretary and Treasurer, and act as a legal contract between the cooperative and the investor. A ‘Record of the Uses of the Seal’ is used to record the certificates issued, as bound by the rules registered with the FSA.
Your Investment- is it safe?
Loanstock is not secured on property and is therefore an unsecured loan. However, there are various parameters in place that make the investment trustworthy. Namely, the loan is not based on any individual and their personal income, instead al financial loans made to the Cooperative are based on returns acquired through the payment of rent. . and if a member can't pay rent, then the Cooperative has to find a new member that can. As a working The Breaking Ground Housing Cooperative Ltd : 31926 R :
Unit 15, 86b Main Yard, 86-90 Wallis Road, London, E9 5LN model, it is extremely rare for Housing Cooperatives to fail on repayments. If for some reason the Cooperative was unable to fulfil its financial obligations at the end of a fixed term it can either take out new loans or issue new loanstock to cover repayment costs. As a last resort the co-op would always be able to sel its' assests, or even the property, and should thus be able to repay al loans.
Interest and Reinvestment
The interest generated on investment will be calculated annual y on the date that the loanstock issue closes (this is detailed in the Thank You letter). This amount is then reinvested in the form of Compound Interest, the accumulation of interest on your investment will continue to rise each year, with a higher yield on the following annual interest calculation. This is included in the Conditions of repayment on your Loanstock Certificate. Early Repayment
The Cooperative cannot guarantee any early repayment options. Investing in loanstock will tie your money up for the period of the fixed term. There may be some circumstances where early repayment may be negociable but loanstock holders will not get back the complete interest amount and may lose some of the initial investment paid.
Thank You
The Breaking Ground Housing Cooperative cannot thank you enough for your investment. Every penny counts at this stage. Obviously the more you are wil ing to offer and the lower the interest rate you choose, the greater the benefits for us. Also, if you know someone who may be interested in investing in our project please pass on this Loanstock Pack.
The Breaking Ground Housing Cooperative Ltd : 31926 R :
Unit 15, 86b Main Yard, 86-90 Wallis Road, London, E9 5LN

Source: http://bghc.org.uk/download/2013/03/Loanstock-Explained.pdf