Early funding requirements

Funding will be needed to support the development stages of the NGC.  In the early stages, funding is needed to identify support for the project and to finance research activities.  For instance, the cost of the feasibility study, travel expenses and the cost of renting halls and preparing handouts for producer informational meetings need to be considered.  Funding sources for these types of expenses may include seed money provided by potential members and government grants or loans. 

Seed money

“Seed money” is a term used to describe money raised to fund an NGC’s organizational costs.  The NGC’s organizers may solicit seed money from producers who are interested in the business idea.  The seed money is not an investment in the cooperative and it cannot obligate or entitle the producer to invest at a later date.  Seed money is not refundable to the producers, even if attempts to start up the business fail.  Requesting seed money is helpful because it helps to distinguish between those producers who vocally support the NGC idea and those who support the idea and are willing to show their support with their own money.  It helps the NGC’s organizers to identify at an early stage how serious producers are in their support.

The amount of seed money solicited may be based on the size of a producer’s production base or business, or it may be a fixed amount.  For instance, in its formative stages, one American NGC asked producers to contribute $0.05 (U.S.) per bushel of the commodity to indicate their level of interest in the project.  This seed money drive raised approximately $150,000 from 1,200 producers. Another U.S. cooperative asked producers to contribute $200 (U.S.) each.  A livestock NGC asked producers to indicate their interest in the cooperative by contributing $1 (U.S.) per head of cattle that they would be willing to deliver to the cooperative.  Even though this cooperative managed to raise seed money from over 3,000 producers, it failed to garner enough support later on, during its equity drive.

Even though seed money is important to an NGC in its organizational stages, it is not a guarantee that the NGC will achieve its equity target later on.

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