Cooperative Funding and the SBA

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.