Finding funding for a worker owned
business is a daunting task. Restrictions on types of outside investment limit
for-profit cooperatives to loans. The Small Business Administration (SBA)
according to an article
by Micha Josephy with the Cooperative
Fund of New England (CFNE) states that the SBA as of 2010 now views
cooperatives as small business. While
resources have been open for not-for-profit cooperatives SBA funds were
restricted for the small worker owned business. The Small
Business Act of 2010 opened the doors of the SBA to worker cooperatives to
access low-cost funding as well as other SBA resources available to traditional
small businesses.
In this Act created an Intermediary Lending Pilot of which
non-profit organizations can obtain funds for creating community development.
This includes CFNE and they have already applied, received and dispersed funds
for worker owned businesses in New England. Further cooperatives now have
direct access to 7(a)
General Small Business Loans across the country. These loans are lower
interest and the SBA regulates terms.
This finding gives cooperatives of all
industries access to resources, that were limited to agriculture and rural
community cooperatives. This SBA FAQ
on the Intermediary Lending Pilot states
the qualifying factors for determination as:
“A producer cooperative is
eligible for SBA financing if: (1) it is engaged in a business activity, (2)
the purpose of the cooperative is to obtain financial benefit for itself as an
entity and its members in their capacity as businesses, and (3) each member of
the cooperative is small. (SBA Standard
Operating Procedure 50 10 5(C), p109).”
“Worker cooperatives, in
which the employees of the small business cooperatively own the company, are
eligible for loans under the ILP program if they meet the requirements for
eligible small business concerns in 13 CFR § 109.400.”
This is great news
for anyone interested in developing a cooperative structured business.
