1. Social Economy Enterprise
A “social economy enterprise” is an enterprise operating in the commercial sector that, while having an entrepreneurial character, also pursues a social mission. It can be characterized as follows:
- Its principal aim is to produce goods and services in response to economic, social, individual, and collective needs.
- It is centred on the individual, its principles and operating rules are based on:
- a regulatory framework aimed at ensuring democratic management practices
- activities fostering the individual and collective empowerment of its members and customers
- people and jobs given priority over capital, notably in the distribution of profits and revenue
- collective ownership of capital and the means of production
- Its contribution assessment is based on its impact on local development and communities, notably through the creation of sustainable employment, the development of new services, and the improvement of people’s quality of life.
- It is either an independent private enterprise with a not-for-profit organization or cooperative status, or an independent project initiated by the social economy’s other components: community organizations and social integration enterprises. In both cases, they operate according to an entrepreneurial management philosophy.
- Its economic viability is mainly based on independent revenue drawn from its commercial activities with private and public consumers.
The Trust invests exclusively in social economy enterprises, notably in non-profit organizations and cooperatives, the majority of whose employees reside in Québec, with business assets of under $100 million ($100M) or capital of less than $50 million ($50M).
The Chantier de l’économie sociale Trust provides patient capital products to social economy enterprises throughout Québec.
3. Our Products
The Trust provides financing in the form of patient capital, also known as capitalization loans. Capitalization loans differ from the more traditional loans provided by financial institutions. Usually, financial institutions provide loans that require a monthly repayment of capital and interest, guaranteed by a lien on the enterprise’s assets. In contrast, the Trust’s capitalization loans resemble owner’s equity, because there is no capital repayment requirement before 15 years.
The Trust does not require a guarantee for an patient capital operations (OPC) loan to finance operating fund and equipment needs. Its patient capital real estate (REPC) loan is guaranteed by a mortgage subordinate to real estate mortgages offered by financial institutions.
The Chantier de l’économie sociale Trust is designed to meet the capitalization needs of collective enterprises and provide needed support to start-up, expansion, and development projects in conjunction with other available sources of financing. In short, the principal benefits of Trust financing are:
- The Trust enables enterprises to reduce debt service costs, thereby increasing their loan repayment capacity. In other words, enterprises can reduce their annual cash outlays to repay project financing.
- Most available financial products require relatively quick repayment (5–8 years). This places a lot of pressure on liquidity and capitalization at the moment of these cash outlays. The Trust enables enterprises to postpone capital repayment through patient capital loans with a 15-year moratorium on capital repayment.
- The Trust’s interest rate is set for the duration of financing, which provides enterprises with stable repayment conditions. The Trust therefore assumes the risk with respect to fluctuating interest rates for the duration of the enterprise’s financing (15 years).
- Despite the elevated risk for the Trust, it provides social economy enterprises with an affordable interest rate.
- The Trust’s patient capital loan with a 15-year moratorium on capital repayment is like an advance on the enterprise’s future equity.
- The financial risk is lower for enterprises because the Trust’s patient capital loans require either no guarantee or a guarantee subordinate to any offered by a financial institution.
For more information about the benefits, see the brochure containing practical examples of the impact of the Trust’s patient capital products on project financing. The brochure, entitled “A Unique Product for the Development of Social Economy Enterprises,” is available on the Trust’s website (faire le lien ici).
The Chantier de l’économie sociale Trust can only invest up to 35% of the project cost. This means you must find other sources of financing. This can include member contributions, risk capital bank loans, etc. The Trust operates in tandem with the other financial products available to social economy enterprises, notably local and sectoral investment funds and social economy investment programs to support the capitalization, start-up, and development of social economy enterprises.
The Trust cannot be the sole investor in a project. According to the investment policy, part of a project’s financing must be provided by another source from among the available social economy investment funds and programs. Furthermore, in the case of real estate patient capital, an enterprise must also obtain a mortgage from a financial institution.
The Chantier Trust can provide a loan in such a situation, but costs that have already been incurred will generally not be recognized as part of the financing package.
Contact a representative of the Trust to find out the current rate.
The rate is fixed for the duration of the Trust loan.
The purpose of this fee is to share the risk among the enterprises and the Trust’s private investors. This is one of the reasons the Trust is able to provide affordable interest rates on its patient capital products.
The mutualization fee is charged once, when the Trust investment is disbursed. It represents 1.5% of the total Trust investment and is not negotiable. For a $100,000 loan, an enterprise would make a one-time payment of $1,500.
Interest and monitoring charges are payable on the first day of every month following the Trust disbursement.
No, only on the capital.
Enterprises must repay the capital in full in the 181st month after the investment. They can use funds they have generated or obtain a loan from a financial institution to spread the payment out over time.
You can repay your patient capital loan, in full or in part, at any time before the end of the term with no penalty.
4. Submitting an application
Contact the Chantier Trust by phone or email to submit your proposal.
We accept financing requests throughout the year.
Each request must first be accepted by the Investment Committee, which meets every two weeks. It is then sent to the Trustee Council, which meets every month. Applications must be accompanied by all the supporting documents required by our analyst before presentation to these bodies.