FAQ Owner Loan Campaign
WHY ARE WE DOING THIS?
The Co-op needs startup funds. Our business plan calls for the funds to open our store to come
from a combination of ownership shares, owner loans, traditional financing, and grants. Grocery
co-ops have long used loans from member-owners to raise money and community support for their
stores. Owner loans demonstrate to potential outside lenders that we have a loyal customer base and,
by reducing our total debt-service burden, they make our business stronger.
from a combination of ownership shares, owner loans, traditional financing, and grants. Grocery
co-ops have long used loans from member-owners to raise money and community support for their
stores. Owner loans demonstrate to potential outside lenders that we have a loyal customer base and,
by reducing our total debt-service burden, they make our business stronger.
What will the Co-op do with the money we raise?
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. Our Investor Packet includes a full
discussion of what we will use the money for.
manager to run the store, and buy equipment and store fixtures. Our Investor Packet includes 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.
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: [email protected]) to pay your remaining balance in one payment.
I can’t make a loan. Can I make a contribution to the Co-op?
Yes! We always need contributions from our supporters to pay our operating expenses and help us open our store. Please contribute by credit card on our website. For gifts above $1,000, please make your check payable to Silverton Food Co-op and mail it to P.O. Box 1742, Silverton, OR 97381. Contributions are not tax deductible.
Apart from making a loan or donation, how can I help?
Silverton Food Co-op is gearing up to raise the funds to open our store and that takes 100%
participation from all of our owners! That can be in the form of a member loan, monetary donation,
or a donation of time. Every hour you volunteer you send a message that says, "I believe in the
power of community and cooperation." Together, we can prepare our economy and community for a
brighter future. Ready to dive in? Visit our volunteer page for more info!
participation from all of our owners! That can be in the form of a member loan, monetary donation,
or a donation of time. Every hour you volunteer you send a message that says, "I believe in the
power of community and cooperation." Together, we can prepare our economy and community for a
brighter future. Ready to dive in? Visit our volunteer page for more info!
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):
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 15 years. Principal repayment to you begins after year 10.
- Simple interest of 4% per year accrues on the principal amount from the date we receive your check.
- Interest is paid annually beginning by the end of the year following our first year of operations or by December 31, 2023.
- Interest payments can be taken in the form of store credit.
- Principal repayments begin in year 11, 20% each year with full repayment in year 15.
10 years is a long time to wait before you start to pay my money back. Why so long?
Our business plan projects that we will have to raise significant capital—up to $450,000—from
bank loans. (Please see the Investor Packet .) This traditional financing will be paid back as soon as
we begin to borrow, principal plus interest. By delaying principal payback to owners, we’ll maintain
good cash flow in our early years of operation.
bank loans. (Please see the Investor Packet .) This traditional financing will be paid back as soon as
we begin to borrow, principal plus interest. By delaying principal payback to owners, we’ll maintain
good cash flow in our early years of operation.
How do I make a loan to the Co-op?
First, read the Investor Packet carefully. It contains a sample of the loan agreement you and the
Co-op will sign electronically. 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, please email [email protected] with the following information:
(We are not accepting credit cards for these loans.)
Co-op will sign electronically. 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, please email [email protected] with the following information:
- Full name
- Current address
- Email address you want to receive the loan agreement
- The amount of your loan
(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.
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.
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.
the business.
What happens if I pass away; who will receive the repayment of my loan?
We encourage you to consult with your estate planning adviser. A successor to the lender may
assume the rights and obligations of the lender through the ordinary settlement of the lender’s estate. A successor does not have to be a resident of Oregon or a Co-op owner.
assume the rights and obligations of the lender through the ordinary settlement of the lender’s estate. A successor does not have to be a resident of Oregon or a Co-op owner.
Why do you ask for my social security number when I sign the loan agreement?
When we make interest payments to investors we will send 1099-INT forms and we need your
social security number to file the corresponding information return with the IRS.
social security number to file the corresponding information return with the IRS.
How much time do we have to raise the $800,000 loan goal amount?
Our original securities offering period began on September 30, 2019 and lasted for 12 months. Because our campaign was delayed by the COVID-19 pandemic, we applied for and received a one-year extension to September 30, 2021.
Why aren’t we buying our store?
Our market feasibility study includes projections for leasing space.
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. If we discover we need to change our business plan or use the money for a
different purpose, we will amend our disclosure documents and provide updates to all investors.
projections for servicing the debt we will incur, and the specific uses for the money we will raise in
this loan campaign. If we discover we need to change our business plan or use the money for a
different purpose, we will amend our disclosure documents and provide updates to all investors.
Are we setting our sights too high?
We heard concern from some of our owners, related to the pandemic or otherwise, that $800K
may be too lofty of a goal. In July 2017 G2G Research Group performed a professional market study
that analyzed our market area, demographics, and the sales potential of a co-op food store in
Silverton. The study advised us that we could support only a small store, one with about 2,500 sq. ft.
of sales area. (The average co-op grocery is about 6,500 sq. ft. in sales area, which is typically
60-65% of the total building's area; Life Source in Salem (a natural food store, but not a co-op) has
6,500 sq. ft. in sales area.)
In December 2018, we updated the market study's sales forecasts in anticipation of delivering a letter
of intent to rent the 600 N. Water St. property, a location whose size was consistent with the 2017
market analysis. These updated sales forecasts are the basis for our business plan's 10-year
financials, the projections for expenses, revenue, and the service of debt. These projections informed
the approval of our securities registration for our owner loan offering. These projections call for $1.6
million in start-up capital to build out a site, to hire employees, to purchase equipment, fixtures and
product, and to operate with sustainable cash flow in our early years. We intend to raise about
half of our start-up capital from our owners.
may be too lofty of a goal. In July 2017 G2G Research Group performed a professional market study
that analyzed our market area, demographics, and the sales potential of a co-op food store in
Silverton. The study advised us that we could support only a small store, one with about 2,500 sq. ft.
of sales area. (The average co-op grocery is about 6,500 sq. ft. in sales area, which is typically
60-65% of the total building's area; Life Source in Salem (a natural food store, but not a co-op) has
6,500 sq. ft. in sales area.)
In December 2018, we updated the market study's sales forecasts in anticipation of delivering a letter
of intent to rent the 600 N. Water St. property, a location whose size was consistent with the 2017
market analysis. These updated sales forecasts are the basis for our business plan's 10-year
financials, the projections for expenses, revenue, and the service of debt. These projections informed
the approval of our securities registration for our owner loan offering. These projections call for $1.6
million in start-up capital to build out a site, to hire employees, to purchase equipment, fixtures and
product, and to operate with sustainable cash flow in our early years. We intend to raise about
half of our start-up capital from our owners.
Why don't we just open a smaller store?
We plan to open a small store, compared to what is typical for co-op grocery stores. We are
relying on a professional analysis of Silverton's market for a potential co-op food store and the
financial recommendations of consultants experienced in start-up food co-ops. Our market study
says we have the best chance of success in Silverton if we open a relatively small store, 4,000 total
sq. ft. with about 2,500 sq. ft. of sales area. The average co-op grocery store has 6,500 sq. ft. of sales
area.
relying on a professional analysis of Silverton's market for a potential co-op food store and the
financial recommendations of consultants experienced in start-up food co-ops. Our market study
says we have the best chance of success in Silverton if we open a relatively small store, 4,000 total
sq. ft. with about 2,500 sq. ft. of sales area. The average co-op grocery store has 6,500 sq. ft. of sales
area.
Can we raise more than $800,000 in loans from our owners?
The terms of our securities registration with Oregon require that 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. The co-op can raise additional unlimited funds through gifts.
How has the COVID-19 pandemic impacted the Co-op’s plans and the risks of this
investment?
investment?
We believe that locally sourced food from a diversity of producers has become even more
important to the grocery industry. Existing food co-ops and natural food stores have successfully
adapted to changes in their businesses brought on by health and safety regulations and evolving
norms. We are aware of these developments and will incorporate them into our business plan. Given
the uncertainties of the COVID-19 pandemic, we acknowledge that losing your entire investment,
while an especially remote possibility in a debt offering such as this, is still possible as it is with any
investment you make. See our Investor Packet for more details.
important to the grocery industry. Existing food co-ops and natural food stores have successfully
adapted to changes in their businesses brought on by health and safety regulations and evolving
norms. We are aware of these developments and will incorporate them into our business plan. Given
the uncertainties of the COVID-19 pandemic, we acknowledge that losing your entire investment,
while an especially remote possibility in a debt offering such as this, is still possible as it is with any
investment you make. See our Investor Packet for more details.
What will the Co-op do if we surpass the $200,000 minimum amount but fail to reach our goal of $800,000 in owner loans?
Our $800,000 goal in owner loans is only half of what we need to open our store. Bank loans and
grants make up the rest. If we fall short of our owner loan goal we will have to make up the
difference in traditional financing and grants before we can move forward with opening the store.
grants make up the rest. If we fall short of our owner loan goal we will have to make up the
difference in traditional financing and grants before we can move forward with opening the store.
Can the Co-op be financially successful?
Yes. A professional market survey by G2G Research Group produced a sales forecast that
formed the basis for our 10-year financial plan prepared with the assistance of Columinate, a
national consulting cooperative with a focus on start-up food co-ops. See our Investor Packet for
more details on the financial plan.
formed the basis for our 10-year financial plan prepared with the assistance of Columinate, a
national consulting cooperative with a focus on start-up food co-ops. See our Investor Packet for
more details on the financial plan.
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 [email protected] for more information.
