Cooperative Lenders: Who Lends to Co-ops

Cooperative lenders are the banks, loan funds and public programs that finance co-ops, either as their whole mission or as one customer group among several. Most US cooperatives find money in one of three places: a lender built for co-ops (such as a cooperative loan fund or a cooperative bank), an ordinary bank or federal loan programme that accepts co-ops, or a grant programme that pays for the work of starting one. Which fits depends on the kind of co-op, where it is, and what the money is for.

This page lists lenders and programmes whose own websites say they serve cooperatives. Each row says what the organisation says it finances and any ranges it publishes itself. Where a figure is not published, the table says so rather than guessing. Rates, fees and eligibility change, so treat this as a map for where to ask, then get terms in writing from the lender.

The short answer

If you are a US worker, consumer, producer or housing co-op, start with a co-op-specific lender. If you farm or run a farmer-owned business, look at the Farm Credit System and CoBank. If you run an electric co-op, look at the National Rural Utilities Cooperative Finance Corporation. If you are a small business that happens to be a co-op, ask whether the SBA 7(a) programme works for you through an SBA lender. Grants from USDA Rural Development are for specific purposes and are not general working capital.

Lenders and programmes that say they serve co-ops

Lender or programme	Who it says it serves	What it says it finances	Published range
Shared Capital Cooperative	Any US business or housing organisation run on a cooperative basis: worker, consumer, producer and housing co-ops. Borrowers must be members of Shared Capital	Expansions, relocations, leasehold improvements, equipment, inventory, working capital, real estate, startup, conversion to cooperative ownership; housing purchase, refinance and repairs	$5,000 to $1,000,000, for one to ten years
Seed Commons and The Working World	Worker cooperatives and other workers and communities it describes as most excluded; The Working World describes itself as non-extractive finance for worker cooperatives	Its site describes non-extractive lending; The Working World's site has "Apply for a Loan" and "Sell Your Company" pages	No range is published. Ask the lender for a term sheet.
Cooperative Fund of the Northeast	Co-ops in New England and New York	Its site describes loans to democratically owned and controlled businesses	No range is published. Ask the lender for a term sheet.
National Cooperative Bank (NCB)	Independent retailers, purchasing co-ops, worker-owned co-ops, housing co-ops, condos, HOAs and credit unions	Term loans, lines of credit, commercial real estate loans, community association loans, and SBA loans as a Preferred SBA Lender	Term loans up to 10 years; no amount range is published
CoBank	Agribusinesses, rural infrastructure providers and Farm Credit associations; its site names grain cooperatives, electric distribution cooperatives and water cooperatives	Food and agribusiness, power, water and communications	No range is published. Ask the lender for a term sheet.
Farm Credit System	Its site lists farmer-owned co-ops and agribusiness among its customer groups	Credit and financial services for agriculture and rural communities	Varies by local association
National Rural Utilities Cooperative Finance Corporation (CFC)	Members of the rural electric cooperative network	Financing and strategic services for rural electric cooperatives	No range is published. Ask the lender for a term sheet.
USDA Rural Cooperative Development Grants	Nonprofits and higher education institutions that run cooperative development centres	Help starting, expanding or improving rural co-ops and other mutually owned businesses, delivered through the centres	Maximum award of $200,000, with a 25% matching requirement
USDA Value-Added Producer Grants	Agricultural producers, producer groups, farmer and rancher cooperatives and majority-controlled producer-based ventures	Starting or expanding value-added processing and marketing	Planning grants up to $50,000 and working capital grants up to $200,000 in the latest round read, with a 1:1 match
SBA 7(a) loans	Small businesses under SBA size standards, through SBA lenders	General business purposes	Most loans have a maximum of $5 million

No lender in this table is ranked or recommended. The order is not a quality order, and the right fit for a bakery co-op in Ohio is not the right fit for a farmer-owned processor in Minnesota.

How the types differ

Co-op loan funds

Shared Capital Cooperative, Seed Commons, The Working World and the Cooperative Fund of the Northeast are loan funds built around cooperatives. Shared Capital describes itself as a lending and investment fund that is itself cooperatively owned by the co-ops that borrow from and invest in it, and it requires borrowers to join. Co-op structure matters most for worker cooperatives and for conversions, where an owner sells a business to its employees.

Banks that serve co-ops

National Cooperative Bank describes itself as a bank dedicated to delivering banking products to cooperatives and other member-owned organisations. It offers conventional business lending and also states that, as a Preferred SBA Lender, it offers SBA loan programmes. For housing co-ops it offers first and second mortgages and lines of credit. If you are comparing it with a loan fund, ask each for the same term sheet: amount, term, rate, fees, collateral, personal guarantees and how member equity is treated.

Agricultural and rural infrastructure lenders

CoBank and the Farm Credit System are themselves cooperatives and focus on agriculture and rural infrastructure. The Farm Credit System describes itself as a nationwide network of customer-owned cooperatives, and CoBank describes itself as a cooperative bank. They are the usual route for agricultural cooperatives of any size. Rural electric co-ops have their own national lender in CFC, which describes its mission as meeting the financing and strategic services needs of the rural electric cooperative network.

Public programmes

USDA Rural Development runs two programmes co-ops hear about most, and they work very differently. The Rural Cooperative Development Grant programme pays nonprofits and universities that help people start and run co-ops. A co-op does not apply to it for its own working capital, though it can use the help of a centre that is funded by it. The Value-Added Producer Grants programme can go to farmer and rancher cooperatives directly, for planning or working capital for value-added activities such as processing and marketing. Both are competitive and open in windows, so check the current notice before planning around them.

The SBA 7(a) programme is a loan guarantee made through participating lenders. The SBA's terms page says most 7(a) loans have a maximum of $5 million, that maturity is ten years or less unless the loan finances real estate or equipment with a longer useful life, and that real estate loans can run up to 25 years. The page does not mention cooperatives either way, and the federal rule listing ineligible businesses does not name them, but the lender decides whether it will make the loan. Ask an SBA lender directly before assuming it works for your co-op.

What lenders usually want to see

Every lender has its own checklist, and none of the lenders above publishes one. These are the areas worth preparing before you call:

Area	What to prepare
Business	A business plan, financial statements and projections, and a clear purpose for the money
Cooperative structure	Articles, bylaws, and how members buy in, vote and share surplus. See cooperative bylaws
Member equity	How much members have put in, and how it is repaid when they leave
Governance	Who is on the board, how decisions get made and how disputes are handled
Repayment	Cash flow to cover the loan, and what collateral or guarantees are offered
Surplus sharing	How patronage is allocated, since it affects cash available. See patronage refunds

Shared Capital, for example, says it especially seeks to support cooperatives organised by low-income and economically and socially disadvantaged communities.

Starting out versus converting an existing business

The first loan for a new co-op is often small and paired with technical help. Shared Capital's own list of recent borrowers shows start-up loans of tens of thousands of dollars for worker co-ops alongside conversions and working-capital loans that run higher. Those are examples of what it has funded, not a rule for what you will get. The steps before borrowing are in how to start a worker cooperative and, for a financial co-op, how to start a credit union.

If you want to buy out a retiring owner, a conversion loan is a different animal from startup money: the loan buys an existing business with cash flow, so the lender looks at the business's track record. Some owners choose a different employee-ownership route, which is compared in employee-owned company and worker cooperative vs employee-owned.

Questions to ask any lender

Do you lend to cooperatives of my type and in my state?
What is the minimum and maximum amount, the term and the rate structure?
How do you treat member equity and patronage in your underwriting?
Do I have to become a member, buy shares or pay any fee?
What collateral and guarantees do you require, and who gives them?
What reports will I owe after closing, and how often?
What happens if cash flow falls behind plan?

Where this fits in co-op finance

Loans are only part of how a co-op is funded. Members put in equity, retain surplus, and sometimes raise capital from outside investors under limits set by state law. The full range is in cooperative finance, and a plain summary of loan types is in loans for cooperatives. How surplus is returned to members, and the tax rules that sit behind it, are in cooperative taxation.

Frequently asked questions

Which lender is best for a new worker co-op?

There is no single best. Co-op loan funds such as Shared Capital Cooperative and The Working World describe worker co-ops as part of their focus, and NCB names worker-owned co-ops among the customers of its small business banking. Compare terms from at least two, in writing.

Can a cooperative get an SBA loan?

The SBA's 7(a) terms page does not address cooperatives, and the rule on ineligible businesses does not list them. Whether your co-op can borrow depends on meeting SBA's small-business size standards and on the lender's own underwriting. Ask an SBA lender before you plan around it.

Do grants pay for a co-op's startup costs?

Sometimes. USDA's Rural Cooperative Development Grants fund the centres that help people start co-ops, rather than paying the co-op itself. Value-Added Producer Grants can go to farmer cooperatives for specific value-added work.

Do I have to join a cooperative lender to borrow?

Some require it. Shared Capital Cooperative states that a co-op must be a member to borrow. Ask each lender.

Do lenders publish their rates?

None of the co-op-specific lenders publishes rates. Ask for a term sheet.

Is there a lender for housing co-ops?

Shared Capital Cooperative lists housing loans for purchase, refinance and repairs, and NCB lists first mortgages, second mortgages and lines of credit for housing cooperatives. See housing cooperatives for how the structure works.