Natural Times, January/February/March 2014
By June Wiaz
Seven years ago, your New Leaf Board of Directors asked the store’s owners to consider making loans for the expansion into the space that was occupied by Crystal Connection. That renovation ultimately was successful, affording our shoppers a larger produce section, a new cheese cooler, a larger deli operation, and many other expanded offerings. And it would not have been possible without the generous support of our owners whose loans of almost $300,000 allowed us to demonstrate the necessary financial wherewithal before approaching banks. (This is the model followed by most co-ops when they choose to expand—first they approach their owners, then the banks.) Owner loans help these projects get off the ground and reduce the capital that we would need to borrow from a bank.
And now we have another opportunity to involve our owners in the next exciting business venture – a second store at Bannerman Crossing (a strip mall on the southwest corner of Bannerman Road and Thomasville Road), well to the north of our existing site on Apalachee Parkway. Store management, with board consultation, has been building capital for years by retaining a small proportion of owner patronage. The financial management of New Leaf has been conservative, and the existing store has only minimal debt. That careful fiscal control has placed the store in good standing as we approach the starting line for a second location.
New Leaf has been considering a second store for some time. Finally, a proposal with very favorable terms at a desirable location has presented itself. The board, store management and staff are excited about the possibilities, but we know sufficient loan participants and size of loans will make all the difference in this enterprise.
Details of the loan program follow. Please take the time to review the terms of the loans and consider lending your financial support for our expansion to a second store. This will allow New Leaf Market Co-op to reach a new population in furtherance of empowered healthful (and local) eating. This is an opportunity for you to invest locally in a co-operative business whose mission you support.
Anticipated Frequently Asked Questions About the Loan Program:
1) Why owner loans?
In addition to the equity the store has from one-time owner fees, loans from our owners demonstrate the community support that banks look for in an expansion project, which puts the store in better financial position for taking on commercial loans. Plus, it’s still likely a win-win for our owners as interest on investments at financial institutions lately have been paying well less than 0.5 percent. The terms of our loans will be more favorable, at least in the near term.
2) What are the terms of the owner loans?
All primary New Leaf Market Co-op owners will have the opportunity to invest anywhere from $1,000 to $50,000, with a historical average loan of $4,000. The owner/investor will choose an interest rate of 0-2.5% on loans less than $10,000; or 0-4% on loans over $10,000. They will also negotiate the payback period for the loan – anywhere from four to seven years. We emphasize that these loans should be viewed more as an investment in the community than a strictly financial investment. You can think of this as a local green economy investment with a multiplier effect that benefits other local businesses. But unlike a market fund such as Green Century where you can cash out at any time, that will not be the case with the money you loan to New Leaf. You will get interest yearly and the principal back at the end of the agreed-upon loan period. While it is possible the loan will be paid back earlier, as was the case with the previous expansion, we cannot plan on accelerating the paybacks. So please bear that in mind as you decide whether and how much you can loan to the store. Bear in mind, too, that owner loans will be unsecured and subordinated to the claims of any creditors who hold a security interest in some or all of New Leaf Market Co-op’s assets.
3) Are there risks associated with this loan program?
Yes, as with many investments, there are risks as noted above, due to the fact that these are unsecured and subordinate to bank loans. There are other risks as well, and these will be described in the Offering Memorandum which will be provided to you if you are interested in participating in the owner loan program.
4) What can you do now, and are there things you can do to support this initiative if you don’t personally have funds to invest?
In truth, right now we are most focused on finding internal capital from our owners. But even if you personally cannot invest at this time, you can help by talking about this opportunity with your Co-op friends and pointing out this information to them so that they can contact our owner loan team. As you consider making a loan, think about the motivation beyond financial payback. This is an opportunity to further support our local growers and producers, to enhance economic sustainability in our region (including the direct 50-60 new jobs for the second store) and expand our co-op community.
Owner loans play a crucial role in the establishment and growth of our co-operative business, and the expansion of the co-operative movement. Your support of the owner loan program will enable construction to begin, allowing New Leaf Market Co-op to better serve all of Tallahassee.
5) In summary, how will owner loans help New Leaf Market Co-op?
- By allowing internal construction to begin at the Bannerman site. (The storefront already exists.)
- Provide owners and other shoppers greater access to fresh, local and organic foods.
- Support local growers and producers and the local economy, while creating jobs in a thriving business.
- Provide education about the co-operative business model, food, health and related topics.
- Provide another venue for a pleasant, community-focused shopping experience.If you are excited to loan money to the Co-op and are ready to get started now, contact: Benjamen Goldberg, owner loan coordinator, at 942-2557 ext. 239, or write to owner email@example.com.
If you are excited to loan money to the Co-op and are ready to get started now, contact: Benjamen Goldberg, owner loan coordinator, at 942-2557 ext. 239, or write to owner firstname.lastname@example.org.