FAQ Owner Loan Campaign
WHY ARE WE DOING THIS?
Our business plan, developed by professional consultants, calls for raising from our individual owners over half of the capital we’ll need to open our store. That’s YOU! Our Co-op is a grassroots effort to bring a community-owned food store to Silverton.
What will the Co-op do with the money we raise?
Among other things, we will identify a site to lease, hire contractors to build it out for our store, hire a general manager to run the store, and buy equipment and store fixtures. Read our Investor Packet for a full discussion of what we will use the money for.
What’s the difference between my Co-op share purchase and a loan to the Co-op?
When you joined the Co-op you purchased one share of common stock for $150. Your share is your ownership interest in the Co-op and entitles you to vote on Co-op matters. It makes you eligible to make a loan to the Co-op. Your loan is a separate financial agreement you make with the Co-op. If you moved to a different state and could no longer shop at the Co-op, you could resign your membership and redeem your ownership share, and your loan agreement would still be in effect.
Who can make a loan to the Co-op?
To make a loan you have to be an Oregon resident and a fully paid shareowner of the Co-op. If you are an owner on a share payment plan, you must complete your payments before you can make a loan. Contact us (email: firstname.lastname@example.org) to pay your remaining balance in one payment.
What are the basic loan terms?
Here are selected highlights of the loan terms (Please see our Investor Packet for a sample loan agreement containing the full loan terms):
- The minimum loan amount is $2,000. There is no maximum amount. We encourage investments rounded to $1,000 increments.
- The loan period is for 15 years.
- You accrue simple interest on the principal amount of 4% per year from the date we receive your check. On a $5,000 loan we would pay $200 in interest per year.
- We will pay you interest annually beginning in the year following our first year of operations.
- In your Loan Agreement you can elect to take interest payments in the form of store credit. You can revoke this election and switch to cash payments of interest. Should you move out of the area and no longer shop at the store, you could inform us that you now want cash payments of interest.
- We will return your principal after year 10, 20% each year through year 15 of the loan period.
10 years is a long time to wait before you start to pay my money back. Why so long?
Our business plan (please see the Investor Packet) projects that we will have to raise significant capital—up to $500,000—from other sources, like bank loans. The plan projects that these debts we will have to pay back as soon as we begin to borrow, principal plus interest. We need our owners to wait for principal payback so we’ll maintain good cash flow in our early years of operation. You’ll be receiving interest payments for as long as we are putting your money to work in the store.
How do I make a loan to the Co-op?
First, read the Investor Packet (also called Prospectus or Offering Memorandum) carefully. It contains a sample of the loan agreement you and the Co-op will sign. It contains a sample of the promissory note the Co-op will sign. It also contains our required disclosures of the risks of this investment and our business plan and financial projections. If you decide to invest, email us the amount of your loan and ask for a loan agreement to sign electronically. (If you aren’t able to sign electronically, let us know and we will make arrangements with you to sign on paper.) Write a check for the loan amount and mail it to us. A “Bill-Pay” check from your online bank account sent to our P.O. Box is OK, too. (We are not accepting credit cards for these loans.)
What’s the escrow account for?
Our securities registration filed with the State of Oregon requires that the first $200,000 of owner loans be put in a non-interest bearing escrow account, supervised by an independent third party. If we fail to raise at least $200,000 during our owner loan campaign, the escrow agent will return the money to the individual investors. If we raise at least $200,000, the escrow agent will release the funds to the Co-op.
I live in the household of a Co-op owner. Can I make a loan?
Only individual shareowners are eligible to make a loan to the Co-op. You can purchase your own share ($150) and then you can make a loan to the Co-op.
My business is a shareowner of the Co-op. Can my business make a loan?
Yes. A principal of a business shareowner of the Co-op can sign the loan agreement on behalf of the business.
How much time do we have to raise the $800,000 goal amount?
Our securities registration with Oregon is good for 12 months. The securities offering period ends September 30, 2020. We could file a request for an extension if we need more time, but an extension is at the discretion of Oregon regulators.
Why aren’t we buying our store?
We hired consultants to conduct a market feasibility study and to develop a business plan. We believe we have the best chance of success—given our projections for gross sales and capital raising—with leasing an existing space, building it out to suit our needs.
If we can’t find a site to lease, can we use the money we raise to buy land or a building?
The securities registration we filed with the State of Oregon discloses our business plan, our projections for servicing the debt we will incur, and the specific uses for the money we will raise in this loan campaign. We could use the money for a different purpose only if we amend our registration documents, including our financial projections, and receive approval from the government regulators.
Can we raise more than $800,000 from our owners?
The terms of our securities registration with Oregon require than we collect not more than $800,000 in loans from our owners. To increase the maximum offering amount we could amend our registration documents, including our financial projections, and seek approval from government regulators for the amendment.
I can’t make a loan. Can I make a donation to the Co-op?
Yes! We always need contributions from our supporters to pay our operating expenses. You can also earmark your check to specifically benefit the same purposes as the owner loans will. Write “Capital Campaign” in the memo line of your check. Every amount gets us closer to our goal of opening the store. Send a check to our P.O. Box 1742, Silverton, OR 97381 or email email@example.com to make other arrangements. Contributions are not tax deductible.
Apart from making a loan or donation, how can I help?
This page and the description of owner loans and the owner loan campaign do not constitute an offer to sell or a solicitation of an offer to purchase securities. If you are an Oregon resident and a full-share owner of Silverton Food Co-op, please review our offering memorandum and disclosure documents. Email us at firstname.lastname@example.org for more information.