Delridge Grocery Co-op Member Loan Campaign – Common Questions
We believe in the strength of our business plan and the strength of the community to make this a cooperative success. We will treat your money with great care and strongly believe that all funds will be paid back.
Co-ops nationwide have had very successful member loan programs. It is fantastic that community members can invest together to create community-owned assets. The money comes from the community and stays in the community.
Here are some common questions regarding member owner loans:
What is a member owner loan?
Simply put, it is a member of the Co-op choosing to lend the business money. The terms for member loans are between four and eight years. The loan and accrued interest will be returned in a lump sum payment at the end of your chosen term. Members can choose the terms of their loans and the amount of interest they receive, from 0 to 3%. The minimum loan amount is $1,000.
Isn’t my membership enough? Why is a member loan needed?
The Co-op needs start-up funds. Funds to start the grocery come from memberships, member loans, outside loans, and grants. Member loan programs are long-standing methods used by co-ops to raise money and community support for their stores. They demonstrate the existence of a loyal customer base and reduce debt service, making the business stronger.
Commercial loans involve higher interest rates than member loans do, and require payback to begin immediately. Additional member loans will enable the Co-op either to retire a portion of these loans now, or allow us to forgo drawing on lines of credit. The resulting financial structure will significantly reduce debt service in the critical first four years of operations.
Can Delridge Grocery Co-op be financially successful?
Yes. A professional market survey in our business plan forecasted adequate sales potential for the Delridge Grocery Co-op. Profit is expected by year three, and we project no difficulty in repaying loans. Additionally, national trends show the financial performance of co-ops around the country has been extremely good.
Do you have a financial plan?
Yes. The Business Plan and ten year pro forma for the Delridge Grocery Co-op was developed with the help of staff and student interns of Startzone Northwest, a program of the Center for Inclusive Entrepreneurship at Bainbridge Graduate Institute. We also received significant support from Stuart Reid, Executive Director of The Food Co-op Initiative, who provided examples, templates, and benchmarks. This plan shows that with adequate start-up funding and the sales potential the market survey identified, Delridge Grocery Co-op will be successful.
How will you be able to compete with other area grocery stores?
Competition for Delridge Grocery Co-op is mostly confined to stores that are a 6 to 10 minute drive away from Delridge. As of 2014, only the Super 24 Food Store and Delridge Deli Mart sells produce of any kind along Delridge Way SW, but selection is extremely limited and of poor quality, creating a strong opportunity for a small grocery.
Can I make a loan now and still make another one later?
Yes. For some households, temporary conditions limit their current lending ability. Arrangements can be made for a second loan in the future.
Are the Member loans secured?
No. There is no fixed asset or fund that backs up your member loan. However, when we borrow your money, we will put it in an account that will only be used when we have the go ahead on this project, and if this project does not proceed, we will return your money. We can provide you with the business plan, which includes pro forma projections covering the first ten years of operations. These projections show that the business will produce adequate cash to pay back all member loans starting in year five.
We need the loans to fund the construction of the DESC retail space, buy equipment, and provide enough start-up capital to purchase inventory and pay necessary expenses.
If we proceed with the project and it ultimately does not succeed, the Board will take all steps possible to return unsecured member loans.
Interested in learning more about the member owner loans? Here’s what to do:
Upon request, we can share our detailed business plan with you to evaluate for yourself our chance of success.