Shared model refers to the database being shared, rather than the svn repository- however you're right that the folder won't normally be empty once the first user has linked up.
The normal process when getting started with SQL Source Control would be for the first user to link to a new empty folder in SVN and commit everything. Other users would then link to the same place and will also be able to commit changes. The folder doesn't need to be empty for subsequent users because we add an empty file (called RedGate.ssc) to the folder so we know it's used by SQL Source Control.
If you're trying to link for the first time to an existing set of scripts (perhaps created by SQL Compare) then you'll just need to manually create that file for it to work. If the contents of that folder weren't created by our tools, then you may be linking to the wrong place though.