Dear Chairman Rubio, Ranking Member Cardin, Chairwoman Velazquez, and Ranking Member Chabot:
Thank you for your leadership on the House Small Business Committee to help create an economy that works for Main Street America.
We write to you today to request a committee hearing on the Small Business Administration’s (SBA) recent report to Congress, “Cooperative Lending – Personal Guarantee Requirement” that was required through the bipartisan supported and passage of the Main Street Employee Ownership Act.
The Main Street Employee Ownership Act, included in the National Defense Authorization Act of Fiscal Year 2019 (Public Law No. 115-232), required SBA to “study and recommend practical alternatives for cooperatives that will satisfy the loan guarantee requirements of the Administration.”
During two listening sessions, SBA heard from many different entities within the cooperative sector: lenders (including CDFIs), trade associations, potential borrowers, and community and economic developers. Through these discussions, and in a separate meeting with the U.S. Department of Agriculture that makes loans to cooperatives without personal guarantees, there were numerous alternatives proposed to the personal guarantee requirement that would enable the SBA to lend to cooperative businesses while mitigating risk.
We appreciated SBA’s engagement and were hopeful there would be a commonsense solution to resolve the barriers for cooperative businesses. Additionally, we were optimistic that SBA would take a nominal step and provide alternatives and ideas of its own.
We were greatly disappointed to learn that the SBA did not provide any practical alternatives as required by law, and instead, relied on its existing requirements that make it implausible for cooperative businesses to access the agency’s programs.
Further, SBA’s recommendation regarding an existing business to be sold and converted to an employee-owned cooperative would actually create new barriers. The agency recommends that a selling business owner provide a full, unlimited personal guarantee for the life of the loan. This is an entirely unreasonable request for a business owner entering retirement. Imagine a small business owner selling their business, but having to sign a personal guarantee for the buyer’s own loan.
For decades, the cooperative industry has asked SBA to level the playing field for cooperative businesses. In 2012, a House delegation sent a letter to SBA to resolve this issue, and now seven years later, Congress has again directed the agency to finally find a solution. With the seeming lack of support from the SBA, we ask that your committee assert itself and make this a priority to resolve.
Thank you for considering our request to hold a committee hearing. We look forward to continuing to work with Congress and the SBA to find a solution that will uphold the intent of Congress and enable growing cooperative businesses to finally access SBA financing.
Sincerely,
40 Square Cooperative Solutions, Bloomington, Minnesota
A Slice of New York, Santa Clara, California
Blue Hill Co-op, Blue Hill, Maine
Brattleboro Food Co-op, Brattleboro, Vermont
Buffalo Mountain Food Co-op & Cafe, Hardwick, VT
California Center for Cooperative Development, Davis, California
Capital Impact Partners, Washington, D.C.
Caruso Co-operative Consulting, Tolland, Connecticut
CCEC, Chicago, Illinois
Center for Economic Democracy, Boston, Massachusetts
Chicago Community Loan Fund, Chicago, Illinois
CoBank, Greenwood Village, Colorado
Consumer Federation of America, Washington, D.C.
Community Purchasing Alliance Cooperative, Washington, D.C.
Community Reinvestment Fund, USA; Minneapolis, Minnesota
Community Wealth Builders, Baltimore, Maryland
CooperationWorks!, Berkeley, California
Cooperative Development Foundation, Washington, D.C.
Cooperative Development Institute, Northampton, Massachusetts
Cooperative Development Services Inc., Saint Paul, Minnesota
Cooperative Fund of New England, Amherst, Massachusetts
Cooperative Network, Madison, Wisconsin
Corrigan Consulting, Chicago, Illinois
Credit Union National Association, Madison, Wisconsin
Daily Groceries Co-op, Athens, Georgia
Democracy at Work Institute, Oakland, California
Employee Ownership Expansion Network, Arlington, Virginia
Farm Credit Council, Washington, D.C.
Fiddleheads Food Co-op, New London, Connecticut
Firebrand Cooperative, Fargo, North Dakota
Flatbush Food Cooperative, Brooklyn, New York
Florida Cooperative Empowered Economic Development Corp., Saint Petersburg, Florida
Food Co-op Initiative, Savage, Minnesota
Franklin Community Co-op, Greenfield, Massachusetts
Fredericksburg Food Cooperative, Fredericksburg, Virginia
Friendly City Food Co-op, Harrisonburg, Virginia
Fund for Democratic Communities, Greensboro, North Carolina
Georgia Center for Employee Ownership, Atlanta, Georgia
Hanover Co-op Food Stores & Auto Service Centers, Hanover, New Hampshire
Hunger Mountain Cooperative, Montpelier, Vermont
Indiana Center for Employee Ownership, Indianapolis, Indiana
Indiana Cooperative Development Center, Indianapolis, Indiana
Indiana Farmers Union, Morristown, Indiana
Jason Wiener | p.c., Boulder, Colorado
Keystone Development Center, Ephrata, Pennsylvania
Lake County Community Development Corporation, Ronan, Montana
Littleton Food Co-op, Littleton, New Hampshire
Local Enterprise Assistance Fund (LEAF), Boston, Massachusetts
Mad River Market, LLC, Winsted, Connecticut
Main Street Alliance, Washington, D.C.
Maryland Center for Employee Ownership, Baltimore, Maryland
Middlebury Natural Foods Co-op, Middlebury, Vermont
Minnesota Cooperative Education Foundation, Saint Paul, Minnesota
Missouri Farmers Union, Clarence, Missouri
Montana Cooperative Development Center, Great Falls, Montana
Montana Farmers Union, Great Falls, Montana
NASCO Development Services, Chicago, Illinois
National Center for Employee Ownership, Oakland, California
National Co+op Grocers, Iowa City, Iowa
National Cooperative Bank, Arlington, Virginia
National Cooperative Business Association CLUSA International, Washington, D.C.
National Council of Farmer Cooperatives, Washington, D.C.
National Farmers Union, Washington, D.C.
Nebraska Farmers Union, Lincoln, Nebraska
Neighboring Food Co-op Association, Shelburne Falls, Massachusetts
New England Farmers Union, Shelburne Falls, Massachusetts
New Whalom Cooperative LLC, Leominster, Massachusetts
New York City Network of Worker Cooperatives, Brooklyn, NY
North American Students of Cooperation, Chicago, Illinois
North Carolina Employee Ownership Center, Durham, North Carolina
North Dakota Association of Rural Electric Cooperatives, Mandan, North Dakota
North Dakota Farmers Union, Jamestown, North Dakota
North Wind Renewable Energy Cooperative, Stevens Point, Wisconsin
Northeast Organic Farming Association/Massachusetts Chapter, Barre, Massachusetts
Northwest Cooperative Development Center, Olympia, Washington
Ohio Farmers Union, Ottawa, Ohio
Pennsylvania Center for Employee Ownership, Havertown, Pennsylvania
Philadelphia Area Cooperative Alliance, Philadelphia, Pennsylvania
Platform Cooperativism Consortium, New York City, New York
Project Equity, Oakland, California
Putney Food Co-op, Putney, Vermont
Ravalli County Economic Development Authority, Hamilton, Montana
Rhode Island Center for Employee Ownership, Providence, Rhode Island
Rocky Mountain Employee Ownership Center, Denver, Colorado
Rocky Mountain Farmers Union, Denver, Colorado
Shared Capital Cooperative, Saint Paul, Minnesota
South Dakota Farmers Union, Huron, South Dakota
Sustainable Economies Law Center, Oakland, California
Technicians for Sustainability, Tucson, Arizona
The Bailey Group LLC, Annandale, Virginia
The Cooperative Catalyst of New Mexico, Albuquerque, New Mexico
The Federation of Southern Cooperatives/Land Assistance Fund, East Point, Georgia
The ICA Group, Northampton, Massachusetts
The Working World, New York, New York
U.S. Federation of Worker Cooperatives, Oakland, California
Upside Down Consulting LLC, Chicago, Illinois
Valley Alliance of Worker Co-operatives, Northampton, Massachusetts
Valley Co-operative Business Association, Shelburne Falls, Massachusetts
Vermont Employee Ownership Center, Burlington, Vermont
Washington Area Community Investment Fund, Washington, D.C.
Willimantic Food Co-op, Willimantic, Connecticut
Work Hard Pittsburgh, Pittsburgh, Pennsylvania