Food cooperatives now eligible for Small Business Administration loans

While some cooperatives reach Fortune 500 status, most are small businesses that rely on debt financing more than investor-owned firms. While some cooperatives reach Fortune 500 status, most are small businesses that rely on debt financing more than investor-owned firms. While some cooperatives reach Fortune 500 status, most are small businesses that rely on debt financing more than investor-owned firms. NCBA CLUSA is pleased to report that the U.S. Small Business Administration is eliminating a regulation that has blocked food cooperatives from accessing its lending programs for more than 50 years.

The move comes in response to support received—including from NCBA CLUSA—for a proposed regulation change to the types of businesses identified in Section 120.110 as ineligible for SBA business loans, which had for decades included consumer and marketing cooperatives.

In its support for the proposed change, NCBA CLUSA made that case that although some cooperatives reach Fortune 500 status, the majority of them should be classified as small businesses. Additionally, because cooperatives are owned by their members, they tend to rely on debt financing more than investor-owned firms that can more easily access outside investment capital.

NCBA CLUSA also called for clarity and uniformity relating to the eligibility of cooperatives in accessing debt financing through SBA lending programs, noting that regulations and policies toward cooperatives—dating from the 1960s—no longer reflect the evolving nature of cooperative enterprise. Currently, only certain types of co-ops under certain conditions are eligible for SBA guaranty loans.

The outdated, contradictory language of the regulations has caused confusion, and many lenders have interpreted these regulations broadly, denying access to most, if not all, types of cooperatives.

Individuals and entities advocating for the removal of consumer and marketing cooperatives from the list of ineligible businesses also asked the SBA to reconsider its loan guaranty requirements for cooperatives that do qualify for debt financing.

Because the ownership of most cooperatives consists of multiple members, obtaining personal guaranties from multiple members can be overly burdensome for cooperatives. However, the rules governing guaranties will continue to apply to cooperatives and may ultimately require legislation to change.

TWITTER FEED

Fri Sep 22 22:29:03 +0000 2017

Co-op drones? #NowWeOwn drones :) #HarveyRelief @NRECANews STORY: https://t.co/1x1tFXugaL https://t.co/OLONlq7V27
Fri Sep 22 12:31:06 +0000 2017

Where innovation meets community. https://t.co/biTi22BxR3 https://t.co/bVfBYRBQhH
Fri Sep 22 12:01:03 +0000 2017

Join Rep. @chelliepingree +NYC councilmember @HelenRosenthal at the #CoopIMPACT Conference! It's not too late!… https://t.co/tZgxx2pelF

NEWSLETTER

CONTACT US

This email address is being protected from spambots. You need JavaScript enabled to view it.

202.638.6222

1775 Eye Street NW
8th Floor
Washington, DC 20006