Why Does The SBA Say Its Here To Help Small Businesses If Cooperatives Are Shut Out?

  • The SBA’s rules prevent it from helping most employee-owned and consumer-owned cooperatives, even though Congress has specifically asked it to.
  • After a wave of cooperative startups in the 1960s and ’70s, co-ops have remained a miniscule percentage of the U.S. economy.
  • “We were able to get technical support, but we were not able to get financial support,” Flynn said. “And at the end of the day it’s about the money, baby.”

Lydia DePillis from Propublica writes:

“There are still no grocery stores across a wide swath of northern Flint, Michigan, where a Kroger and a Meijer closed after lead was found in the water in 2015.

So Reginald Flynn, a local pastor and community activist, convened a few people in the auditorium of a charter school he runs to talk about starting a grocery store. He wanted to start a cooperative — a community-owned business not bound by the decisions of a huge grocery chain — and began selling shares to neighbors at $250 each. But he still needed more startup money and had no success getting a bank loan.

Then, a city government official told him about the federal Small Business Administration, which guarantees loans to small companies. The local Small Business Development Center — which operates under the SBA’s direction — evaluated Flynn’s business plan and recommended it to a state grant program after concluding the agency could not back it financially. But the agency’s help stopped there.

“We were able to get technical support, but we were not able to get financial support,” Flynn said. “And at the end of the day it’s about the money, baby.”

Now, after years of stitching together a patchwork of tax credits and grants, with nearly 900 member-owners from the community, Flynn has raised nearly all of the $7.6 million he needs to realize his grocery store dream. It could have happened earlier if he had gotten the same type of loan that the SBA guarantees for hundreds of thousands of smaller businesses.

“I think that the SBA could be more beneficial to the community if it opened up opportunities for co-ops to launch their businesses,” Flynn said. “And I think it’s a win-win.”

Cooperative businesses take many forms in the U.S., from worker-owned enterprises to consumer-owned co-ops to Employee Stock Ownership Plans, which function like worker investment funds that own most or all of a company. Following a wave of cooperative startups in the 1960s and ’70s, co-ops have remained a tiny percentage of the U.S. economy…”

See full story here.



Categories: Business, Government

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