Link Alt Finance 19 11 09
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LINK Conference Chris Cook , Dunblane 19th November 2009 Partnership Finance
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Transcript of Link Alt Finance 19 11 09
LINK Conference
Chris Cook , Dunblane
19th November 2009
Partnership Finance
Partnership-based agreements for sharing
risk and revenues
14/04/23 2
Guarantee Society and Capital Partnership
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Lets look first at the Guarantee Society
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In 18 European countries Guarantee Societies guarantee bank loans to members
Members BanksBanks
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Guarantee Society
Guarantee
Loan
Guarantee
...but banks are starved of capital and have cut lending
14/04/236
NET uses the Guarantee Society in new ways to support any enterprise
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Firstly, to support procurement.....
Council EnterprisesEnterprises
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Guarantee Society
Guarantee
Contract
Guarantee
Secondly, to provide a mutual guarantee for credit between enterprises
Sellers BuyersBuyers
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Credit
Value
Conventionally, sellers may give buyers interest-free credit –or time to pay
Seller BuyerBuyer
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Credit
Value
Banks act as credit intermediaries, to provide trust through implicit guarantee
Seller
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BankBank Buyer
Guarantee Society guarantees credit from member sellers to member buyers…
Seller BuyerBuyer
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Pool
GuaranteeGuarantee
...with a common bond: geographical, functional, or both
Seller BuyerBuyer
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Pool
GuaranteeGuarantee
Both seller and buyer pay into a Pool for the use of the Society’s Guarantee
Seller BuyerBuyer
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Pool
GuaranteeGuarantee
Fee Fee
Buyer settles credit in money, or money’s worth of Value acceptable to seller
Seller BuyerBuyer
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Pool
GuaranteeGuarantee
Fee Fee
Value
If a buyer defaults, Pool pays seller, and collects from buyer
Seller BuyerBuyer
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Pool
CollectsPays
A service provider sets guarantee limits, handles defaults & manages the system
Seller BuyerBuyer
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Pool
ServiceProviderServiceProvider
Services Fee
Fee
Guarantee Guarantee
Fee
The Guarantee Society
Seller BuyerBuyer
14/04/23 18
Pool
ServiceProviderServiceProvider
Services Fee
Fee
Guarantee Guarantee
Fee
Value
Credit
Banks act as service providers not as middlemen
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Capital Partnership – direct investment in production or revenues
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Conventional investment is Equity in Limited Companies
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....a 19th Century legal dinosaur
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...or Debt - loans secured by legal claims eg mortgages
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...giving two conflicting claims over the same productive asset
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But there’s a new furry animal out
there....
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...the 21st Century UK Limited Liability Partnership (LLP)
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An LLP is a corporate body with limited liability....
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...and...errrr...that’s it!...
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As far as the Tax Man is concerned it is a Partnership
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Capital Partnership
Capital PartnershipCapital Partnership
InvestorsInvestors
CustomersCustomers
Managers
CustodianCustodian
% %
£
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Equity Shares - % age shares in revenues or production...
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...or Units - redeemable in production
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Example: “The Art of Flirting” – a film incorporated as an LLP
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The actors received nth’s of the gross revenues...
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...I got 5%...and the producer the rest...
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...except that we needed lights, cameras, pizza, coffee
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Two Capital Partners invested £10k for 20% of revenues
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...if there are any
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Art of Flirting Partnership
Art of Flirting PartnershipArt of Flirting Partnership
Financial Capital(Investors)
Financial Capital(Investors)
ViewersViewers
Human Capital(Actors, Producer, Me)
CustodianCustodian
% %
£
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Everyone was on the same side
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Example: Albion Trust...a charity
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..which provides affordable office space
for social enterprises
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...due to demand they bought a disused church next door
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...and planned a £4m development
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But if they borrow, the rents will be unaffordable
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Solution? An Albion Partnership?
Albion PartnershipAlbion Partnership
InvestorsInvestors
TenantsTenants
Managers
CustodianCustodian
% %
£
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The Capital Partnership aligns stakeholder interests....
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...but it’s not a magic bullet
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Conventional finance requires binding contracts
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Partnership finance requires consensual agreement
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But there may be no magnetism..
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...or partners may fall out...
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A Capital Partnership is not an Organisation
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...it does not own anything, do anything, employ anyone, or contract with anyone...
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...it is simply a framework within which the stakeholders self organise ...
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A Master Partnership
Master Partnership
Master Partnership
Financial Capital(Money, IP etc)
Financial Capital(Money, IP etc)
UsersUsers
Human Capital(Developers, Operators)
CustodiansCustodians
% %
£
14/04/23 56
….is a simple new framework for sharing resources
Maybe a LINK Partnership?
LINK Partnership
LINK Partnership
Financial Capital(Assets, IP etc)
Financial Capital(Assets, IP etc)
UsersUsers
LINK Members(Developers, Operators)
CustodiansCustodians
% %
£
14/04/23 58
Thank You
14/04/23 59
