Details & Example

Loan Security

The Borrowing Community loan is secured by a system of cross-guarantees: each member guarantees to take on a proportionate part of extra responsibility should other members fail to meet their obligations. Prometheus requires that any loan be guaranteed to 150% of the total liability. For Borrowing Communities this means that each member will guarantee 150% of their pledge. Guarantees are legally binding agreements, and should be undertaken in full recognition of the responsibility involved. More details are available in Prometheus leaflet, "Information for Guarantors". Please note that all the original signatories to the loan contract are liable for their repayment and guarantee commitments until the loan is fully repaid.


Procedure

Check with Prometheus that the project qualifies and that there are funds available for the loan.

Once the Borrowing Community has met, agreed on how much to borrow, and chosen a co-ordinator, send a written loan application to Prometheus. Guidelines for the written application can be found on the reverse of our loan application form and should include a description of the purpose of the loan/gift, the amount required and duration of the (re) payments (up to three years), the full names, addresses and proof of identification of the members of the Borrowing Community, and the co-ordinator. Once the loan is approved, the co-ordinator will be contacted to arrange various details of the loan. The loan can be advanced to the Borrowing Community as soon as we have received all documents correctly filled in and signed.

Typical Example

A Borrowing Community of 50 members wishes to make a gift of $50,000 in equal contributions.

Total Repayments for a loan of $50,000 over 3 years:

Principal:            $50,000.00

Arrangement Fee:        $500.00

Interest (9.0%):        $  7,280.00

2% Contingency Allowance:    $  1,155.00

TOTAL:            $58,935.00

Each individual would be responsible for $1,178.70  ($58,935 : 50) or $7.56 weekly over 3 years. Each member also guarantees $1,768 (150% of $1,178), which means that, for example, if 2 members were to default on obligations over 2 years, the rest of the community would be jointly responsible for making up the shortfall; i.e., 2 x $1,178.70 x 2/3 = $1,571.70. Each of the remaining 48 members would have to pay an extra $32.75 over the 2 years, or 32 cents per week. In reality, this is not likely to happen, and the contingency allowance is expected to be sufficient to cover any shortfalls. The Contingency Allowance builds in provision for missed payments and unforeseen costs such as changes in interest rates. If there are none and full repayments are maintained, this will be refunded or gifted to the project.

Borrowing Communities have proven to be a practical solution to the problems of financing valuable cultural enterprises. We are happy to discuss any aspect of a Borrowing Community in detail. Please call or write to us.