Creating a co-operative, like any business, requires a lot of time, effort, and (usually) money. Depending on the business you’re creating, you may need to raise a lot of cash — and keeping track of that cash is key. That’s where a preliminary budget comes in.

As a corporation or a co-operative, you have more options for raising money than simply trying to find it yourself. Not only does the co-operative structure bring multiple people together to invest in a business, it provides several options for how people can invest in the business.

Once you’ve formed a steering committee, draft a preliminary budget. A simple draft budget will help guide discussions about how to raise the capital you need. Use this template with suggested budget items to start planning.

Once the group has a sense of the costs of building the co-operative business written in the preliminary budget, think about where this money could come from. Generally, co-operatives draw on four sources for start-up funds.

1. Membership investment: Co-operatives raise money from their members through membership shares or member loans. This investment gives members ownership rights in the co-op and members will likely expect a return on their investment, especially if it’s a larger amount. A lower cost of entry may encourage more members to join, which may be desirable for some co-ops.
2. Investment shares: Co-operatives can issue non-voting investment shares to their members or the general public. These shares don’t give the holder voting rights but come with the promise of a larger, more regular pay back. There may be additional reporting requirements that come with issuing these shares.
3. Free money (grants/sponsorship/fundraising): This is the best kind of money! Depending on the business the co-op is starting, there may be grants available to help cover some of the start-up costs. Also, community-focused projects may be able to get community support through fundraisers or donations. Select (non-profit) co-ops may be eligible for charitable status, which allows the co-op to issue tax-deductible receipts and can make people more likely to give donations. Platforms like Kickstarter also offer innovative methods of raising start-up capital.
4. Debt: The most familiar form of finding money is debt. Whether a mortgage on a property, an inventory loan from a supplier, a line of credit, or a short-term loan from an equity firm, co-ops can take on various forms of debt. Be sure to read the terms and conditions of a loan carefully; some lenders will require members or a board of directors to secure a loan, making them liable for its repayment if the co-op defaults. Having property or equipment the co-op can use to secure loans will reduce this risk.

Consider creating a chart that can help plan out and identify sources of funds. This part of the preliminary budget will give the steering committee some goals to work towards and weigh the different sources and their impact on the co-op. Here are a few tips:

Enjoy this tool on creating a preliminary budget? Then you might also like our tips for using co-op start-up capital.