The US Congress Small Business Committee has passed a bill that would establish a co-op lending pilot programme to help co-operatives access capital more easily.
The legislation, which would deliver US$25bn (£18bn) in funding to invest in small business programmes, also provides $500m (£360m) to pilot a programme for worker and consumer co-ops to access loan guarantees from the US Small Business Administration (SBA). The co-op lending pilot programme removes the requirement for a personal or entity guarantee from co-operatives. This requirement had been a longstanding barrier to co-operatives in accessing the affordable capital offered by SBA, being incompatible with the co-operative business model.
The Act would require SBA to change regulations on loan guarantees made to co-ops to ensure that risk is adequately mitigated, without requiring a personal or entity guarantee from borrowers. The pilot programme will provide loan guarantees to eligible small business co-operatives for activities including short- and long-term working capital; purchasing equipment and materials; purchasing, constructing or renovating real estate and buildings; and expanding an existing business.
“Small businesses are the foundation of our economy and ultimately the key to our nation making a full economic recovery,” said Chairwoman Nydia Velázquez (D-NY-7). “The small business policies that we advanced today represent a generational investment in America’s entrepreneurs and will help businesses recover from Covid now and prosper in the future. That’s why Congress and the Biden administration must continue moving forward with the Build Back Better agenda and pass this legislation.”
The bill is backed by 250 co-op organisations across the US, including apex NCBA CLUSA, which has been a long advocate for equitable access to SBA capital. President and CEO Doug O’Brien said: “NCBA CLUSA thanks Chairwoman Velázquez for her continued support of co-operative businesses. Co-ops are a tested model for building a more resilient, inclusive and sustainable economy. The Co-op Lending Pilot Program will be critical to ensuring more people can use the co-operative business model to recover from the impacts of Covid-19 by supporting community-owned businesses.”
The National Cooperative Bank also welcomes the bill. “National Cooperative Bank thanks chairwoman Velázquez for her support of small business co-operatives. This bill will increase access to capital for this vital business segment that helps create jobs and fuel local economies,” said Chuck Snyder, chairman and CEO of National Cooperative Bank. The loans will be administered by community financial institutions.
The bill will now be sent back to the House Budget Committee to be included in the Build Back Better Act before being considered by the full House of Representatives and then the Senate.
