What are direct loans?
We would like to finance our project from a variety of sources. The largest of these is a loan from the German foundation Stiftung Umverteilen! which covers 60% of the project’s costs. And because it’s better to have a thousand friends by your side than one bank hanging over you, we decided to cover the remaining 40% from a combination of our own savings and so-called direct loans.
A direct loan consists in a contract for a fixed-term loan signed between the social cooperative První vlaštovka and the individuals who decide to support us. As soon as we have managed to put together sufficient finances by these means, we’ll be able to sign a contract to reserve a chosen property.
Direct loan conditions
For administrative reasons, the minimum value of a direct loan is 5,000 Czech crowns. Our collective has also decided that no loan from any single individual can cover more than 10% of the total property cost. Since we don’t yet have a specific building picked out, we can only work from general information about real estate prices in Prague for kind of building we think would work for us. For this reason, if you’d like to offer us a loan of more than one million crowns, please contact us at firstname.lastname@example.org, and we can discuss how to proceed. We greatly appreciate your interest in investing a meaningful project!
We are able to offer interest rates between 0 and 3%. It’s up to you to set the specific rate. Of course interest-free loans help us most, but we’re also happy to show our appreciation to supporters by offering interest.
Loans are set for a fixed term of at least one year. We prefer to pay off the loan in a single installment at the end of the term, at which point we return the principal to you together with interest. We are, however, open to other payment options, and especially in the case of larger loans it’s no problem for us to agree on a plan to pay in installments, for example once a year.
We’ve also prepared a web-based application that enables you to compare various loan options and look at a sample contract. If you agree with the wording of the contract and the terms of the loan, you can send us your offer through the application, and we’ll respond within 24 hours about where to go from there.
Questions and answers relating to direct loans
On financing in general
How do you plan on covering your project’s costs?
As in communal living networks affiliated with us in Austrian and Germany, the largest part of the cost is covered with a loan from a banking institution. In our case, 60% of the real estate cost will be covered by a loan from the German foundation Stiftung Umverteilen! We’ll have to cover the remaining 40% with contributions by members of the collective who will live in the house, and with money offered by family and friends, but above all with direct loans from our supporters and sympathizers.
How will you pay back the loans?
Our cooperative’s main source of income will be rent, and for this reason we are not too dependent on external conditions. As is said, people will also need to live somewhere, and for this reason our system is stable and reliable.
How much money will you need altogether?
At the moment we haven’t chosen a specific building, but we’re looking for a place in the price range of 40 to 50 million crowns. 60% of this will be provided by the Umverteilen foundation, and the remaining 40%, to be collected from our own resources and in loans from our supporters, would amount to around 16 to 18 million. At present, we’re actively looking for a building, and we should soon know the exact sum we’ll need.
How will debt repayment take place? First direct loans, and later the loan from the foundation?
We will pay both the foundation’s loan and the direct loans at the same time.
How much money have you collected so far?
On our website and our Facebook page you can see how much money we’ve currently collected. We update both frequently.
Will the costs of fixing up the building be covered by the direct loans and the loan from the foundation, or by rent?
We’re looking for a building that will not require extensive repairs. In this way we’d like to minimize risk and avoid being dependent on construction companies. The cost of repairs should not be higher than what can be covered by the cooperative members’ own contributions. Additional repairs, beyond the basic repairs required for the whole building, can be covered by individual cooperative members themselves.
Why didn’t you borrow from a bank?
Before we came across the Umverteilen foundation, we tried to persuade local banks to offer us a mortgage with conditions similar to those offered in Austria and Germany. But at present there is no bank in the Czech Republic that offers anything feasible for a project like ours. We hope that once our project is successful, this will change.
Calculator and contract
How big are the loans that people usually offer you?
People offer us loans of various sizes, from a few thousand to a million crowns. Anything, even a small amount, helps. For practical reasons we’ve decided to accept loans for a minimum of 5,000 crowns. Beyond this, as our friends in Austria say, a hundred small loans are better than one large one.
Can I really choose any combination of loan length and size?
Basically yes, but like in a game of Tetris we need to ensure the compatibility of specific loans within our financial system, so that everything fits together. We try, then, to meet our supporters halfway, for example by allowing a variety of combinations. But in exceptional cases we might suggest minor changes after you enter your parameters into the calculator.
With whom will I sign the contract?
The contract is signed between you and the social cooperative První vlaštovka, which will purchase our first building, and which will, for this purpose, obtain the necessary loan from the Umverteilen foundation. The members of První vlaštovka include individuals as well as the association Sdílené domy, whose presence guarantees that the building will be used long-term for residential purposes, and whose established legal structure prohibits any misuse.
Why do you offer varying levels of interest?
We expect people to have varying motivations for lending to us. Some may simply want to save their money and earn interest over a specific period of time, while others want to support us above all because they like our project and want to support it without earning anything themselves.
In the direct loan contract there’s a passage that says I should send the money only when you ask for it. Why can’t I send the money right away?
We would like to collect the money only when we actually need it, and then all at once. That will happen when we sign a contract to purchase the building. We are confident that that time will come soon.
Do you offer compound interest or simple interest?
Our contracts and estimates use so-called simple interest. We think this will be more comfortable both for our supporters who lend to us and for our own accounting. It is easy and transparent to calculate how much we’ll return to you after a specific period of time.
How will my loan be safeguarded? Is it riskier to invest in you than in other, similar investment projects?
Our cooperative’s main and essentially sole “business” will be to offer a place to live to our members in the form of rent. To this end the cooperative will own only a single property. The cooperative will not be involved in any further, and therefore risky, business activity that might in any way endanger your loan. The total sum of loans and interest will be covered by the value of the property that we purchase. Any possible difference will necessarily be covered by our members’ contributions, which we’ll work out at the very end of the process. Since it’s our own place to live that’s at stake, it’s in our best interest to cover all potential risks.
Is it possible to call in the debt before it’s due?
Contracts are signed for a fixed term, and we don’t expect them to be called in sooner. In individual cases, of course, we can work out exceptions to this if both sides agree, as long as it wouldn’t financially endanger the project.