Member Loan F.A.Q.

Q: Who is eligible to make a member loan to the co-op?

A: Only member-owners of South Philly Food Co-op who are legal residents of the Commonwealth of Pennsylvania can make a member loan.

Q: Isn’t my membership enough? Why is a member loan needed?

A: The co-op needs start-up funds. Funds to start the store come from membership equity, member loans, outside loans and grants. Member loan programs are long-standing methods used by co-ops to raise money and show community support for their stores. They demonstrate the existence of a loyal customer base and reduce debt service, which makes the business stronger.

Q: What if I don’t have cash immediately available?

A: Some members have made loans by moving money within their savings portfolios rather than taking it out of current spending.

Q: Can I make a loan now and still make another one later?

A: Yes. For some households, temporary conditions limit their current lending ability. Arrangements can be made for a second loan in the future.

Q: What are some legal assurances?

A: All of the member-owner note program legal documents have been created by an experienced securities attorney. As in any other investment, there are risks involved with making a member loan. Specific risk statements related to making a loan to the South Philly Food Co-op are outlined in our member loan packet, which you can request by emailing capitalcampaign@southphillyfoodcoop.org.

Q: Why is it necessary to have the terms of the loan be so far out?

A: The loans are scheduled to come due over several years, as this spreads out the impact to the Co-op’s outgoing cash flow so we ensure stability over the long term. You have the ability to select the term of your note at 6, 8, or 10 years.

Q: Can I really choose my interest rate?

A: Yes, you select the rate of interest that is repaid to you. We offer 0%, 2%, or 4% interest on your investment.

Q: Why can’t the Co-op just borrow all the funds from banks?

A: Securing financing internally from member loans will enable the Co-op to lessen the overall cost of the project substantially, as commercial loans involve higher interest rates than member loans and require payments to begin immediately. By leveraging member-owner loans, we will significantly reduce debt service in the critical first five years of business. Plus, member-owner loans strengthen our position when negotiating external financing, as they demonstrate to commercial lenders the strong community support we can count on.