Member Loan Programs
Member loans and other investments
Food co-ops have had strong success in securing loans and other investments from their members, thereby achieving such advantages as lower costs for external financing and reinforcing strong and trusting relations among co-op/members/community. A good introduction to this topic appears in “Conducting Member Loan Campaigns,” by Bill Gessner. This article covers the basics terms and parameters, getting organized, and preparing your documents; it is linked under Related Content at the bottom of the present page.
In more recent years, cumulative experience in member loan drives has generated improved resources and many success stories. The primary published resource is a 2009 booklet by Bill Gessner, Beret Griffith, and Ron Griffith: “Member Loan Campaigns: A guide for retail food co-ops.” It is available free as a download from Food Co-op Initiative: http://www.foodcoopinitiative.coop/resources/toolbox. This very thorough manual provides a great deal of information that is essential for a lawful, effective, and reliable member investment program. Startup co-ops as well as established co-ops that plan to conduct such a program will benefit from using this resource.
A 2012 report from Willy Street Co-op, by David Waisman and Lynn Olson, described an investment vehicle they chose to term “member bonds,” with all the characteristics of member loan programs: "Owner Bond Drives Support Growth at Willy Street" is linked below under Related Content. The campaign, banking on previous co-ops experience and strong community support for a second store, was a huge success, generating $1 million in just over one month.
In another example, Chris Dilley provided (September 13, 2012 listserve) some interesting numbers on loan amounts and interest rates in the Kalamazoo Food Co-op’s member loan drive:
“Here in Kalamazoo in 2010 we offered 0-4% up to $9,999 and 0-5% for $10,000 and above. I'd say 25% of our total loans were from loans above $10,000. Our blended rate landed at 3.6%. We raised $580,000 in owner loans toward a $1.5M project this way.”