Community Futures Lending Circles
Formal Lending Circles to be established in the Community Futures Westman Region.
What is a Lending Circle?
A lending circle is a group of people who form an association in order to lend each other money. They can function as formal or informal organizations.
Informal lending circles have been around for centuries, with individual members made up of friends, family members, or entire communities. Trust between members was based on familiarity and social needs.
Community Futures Lending Circles are for either personal loans or for business purposes where the members are people who either already own a business or they are in the process of starting one.
For more information contact Ruth Loewen at loewenr@cfwestman.ca
Why form a lending circle?
The reason for forming a formal lending circle is to have some oversite and accountability on the money being lent, via formal loan agreements and establishing some structure to the lending process.
Sometimes the need for funding is so minimal that financial institutions are reluctant to lend to those entrepreneurs. Lending circles fill that gap.
Some borrowers will have little to no credit history which impacts borrowing from financial institutions. A lending circle can not only fill that gap but also help establish or build credit histories.
Lending Circles not only offer members access to financing, but they can also help foster strong business relationships and friendships, growing a sense of community where people support each other. Many members of a lending circle say one of the biggest benefits of a lending circle is the support that they receive form other members of the lending circle.
What are the benefits?
Credit Score
- Regular contributions and loan payments will contribute to establishing a credit history or improving your credit score.
No 2 Years of Credit Required
- Lending circles do not require the 2 years of credit history that most banks require for loans. This is particularly valuable to people who are new to Canada.
Different Lending Criteria
- The circle can lend to members who have had difficulties accessing small loans.
Community
- Lending circles are a great way to form a sense of community and support for business owners.
Mentoring & Training
- Community Futures Westman will offer support and training to get your lending circle established, and support business development and skills.
How it Works
Step 1
Form a Circle
A group of 5 to 10 people come together and agree to form a lending circle. Usually they will often share a commonality. For example: they are all artists, or all of the members are immigrants. Only one member per household will be permitted to join.
Step 1
Step 2
Elect the Executive
The members then nominate and elect individuals to the following roles: Chairperson, Vice Chairperson, Secretary / Treasurer, and Loans Officer.
Step 3
Decide on Contribution Amount
Collectively the Lending Circle members decide on a dollar amount that they each will contribute on a monthly basis.
Step 3
Step 4
Draft Policies & Procedures
With our guidance members will draft their own policies and procedures of how they would like to run the lending circle.
Step 5
Apply For a Loan
Members will have the opportunity to apply for a loan from the lending circle via a formal loan application process, or apply for a cash secured loan from an external financial institution (depending on how the lending circle is structured.) Loans must be for Business purposes only.
Step 5
Step 6
Monthly Meetings
Monthly meetings will be held on an ongoing basis to consider loans, discuss the status of outstanding loans, accept or decline new members, and discuss any other business that members wish to bring forward. Members will be required to attend these meetings.
Step 7
Monthly Credit Reporting
Each month the loans will be reported to the credit bureau to help improve or establish member’s credit history.
Step 7
Sound like a good fit?
