Thus far, we have discussed only the types of equity that are generated from members. Outside investors often don't consider co-ops to be good investments, for several reasons: Earnings are distributed on the basis of patronage, not on the basis of the amount of investment; return on investment is limited, usually by state law; stock in co-ops cannot be traded on the stock market and does not increase in value over time; and control of the co-op is usually one-member, one-vote, regardless of the number of shares owned. Clearly, an investor who is concerned primarily with making a profit on his or her investment would not find a traditional co-op attractive. However, there are a few mechanisms by which non-members may invest in cooperatives. The primary one is preferred stock.

Most co-op bylaws allow cooperatives to issue preferred stock, which does not provide voting rights. Dividends on preferred stock are paid out before any payments are made to common stockholders. Thus, the sale of preferred stock can be an effective way to attract non-member investors if the co-op desires to do so.

Other methods for cooperatives to build equity from non-members include retained income generated through day to day business conducted with non- members and per unit retains on the sale of goods produced by non-members.