What is an Owner Loan?
An Owner Loan is a common way that co-ops are funded. It's pretty much just what it sounds like - an Owner of Chicago Market decides to give a loan to Chicago Market in order to help fund the design and construction process. Chicago Market is trying to raise $1.8 million in Owner Loans. If you’re a Founding Owner, you may also consider upgrading to the Cultivating Owner level - Level Up here.
Owner Loans sounds like an unusual way to fund a co-op. Is this typical of how co-ops are funded?
It is! Most co-ops use Owner Loans as part of their funding. The Dill Pickle Food Co-op in Logan Square just concluded an owner loan campaign raising over $1 million, and owner loans were a significant part of the funding for the Sugar Beet Co-op in Oak Park.
Why does Chicago Market need Owner Loans? (Isn't Chicago Market funded by Owner Equity?)
Owner Loans are a standard form of financing for co-ops because owner equity is generally not sufficient to finance the entire project. Chicago Market is funded, in part, by Owner Equity, as well as by bank loans, TIF funding (assuming such funding is received) and various other grants. Owner Loan funding is a portion of the funding for Chicago Market; approximately $1.8 million of $6 million.
Who is eligible to make an Owner Loan?
Any Owner of Chicago Market whose primary residence is in the state of Illinois is eligible to make an Owner Loan. Some opportunity for out-of-state and non-Owner loans exist; ask us for details.
How much can I loan to Chicago Market?
There's no upper limit for how much you can loan to Chicago Market! However, there is a minimum loan size of $1000. We're looking for a loan average of $8,000 but will also need some Owners to loan $10,000, $20,000, $50,000 or even more to meet our goal.
Can I make more than one Owner Loan?
Yes, if you are eligible to loan, you can make more than one loan. But each loan must meet the minimum requirement of $1000.
Can I divide my loan payment up over time? (i.e. pay a little each month)
Chicago Market can accept several loans at different times from the same lender (e.g. if someone wants to loan in the beginning of the campaign and then decides to loan more at a later time), but we cannot accept loan payments over time. Each individual loan must meet the minimum $1000 threshold.
Is my money safe if I choose to loan it to Chicago Market?
As with any loan, there are risks to lending to Chicago Market. While we are confident based on our awesome location and strong community response that the project will succeed, it is always possible that it will not. Don't lend more than you can afford. We recommend that Owner lenders think of this loan as part of their overall investment portfolio, rather than using funds needed for their day to day finances.
Are Owner Loans secured?
No, Owner Loans are not secured financing. The Owner loan is unsecured by its terms, in that it is not tied to any lender security interest. In the event of bankruptcy, the U.S. Bankruptcy Code assigns priority first to secured lenders, such as commercial banks, and next to unsecured creditors backed by the Federal Reserve, which includes CDFIs (Community Development Funding Institutions), before other unsecured creditors -- such as Owner lenders. In addition, banks and CDFIs will not allow owner loans to be paid back until they are paid back.
That is a lot of money to raise—why so much?
There are a lot of expenses to opening a new grocery store from scratch. If you would like a more detailed breakdown, we would be glad to send eligible lenders the investment packet which has some financial info in it.
Do you think you will be able to raise this much money?
Yes. Co-ops around the country have been raising money from their owners in order to expand or build new stores. We think our Owners will be motivated to loan in order to get a wonderful, full-service grocery store as well as earn interest on their loan.
What happens if we don’t raise enough?
If we don’t raise enough money we may not be able to build our new store. But we think we’ll reach the goal if you will help!
Why will it take so long for my Owner Loan to be paid back?
We based the repayment schedule on the financial projections described in the Prospectus. In addition, banks and other financial institutions will require that they be paid back prior to the repayment of any owner loans.
What will my Owner Loan be used for?
Owner Loans will be used for design, permitting, construction, furnishing the store, hiring and training employees and marketing the store - in other words, everything necessary to make Chicago Market a reality.
Do you have a financial/business plan that shows how Chicago Market will spend its money?
We do. Most of the financial information from Chicago Market has a detailed business plan that is available upon request. The vast majority of the information from the business plan is contained in the prospectus itself but further financial figures and details of our pro-forma can be reviewed upon request.
How is Chicago Market funded more broadly?
Chicago Market is funded from a variety of sources. These include Owner equity, bank loans, TIF funding (assuming such funding is received) and various other grants. Owner Loan funding is a portion of the funding for Chicago Market; approximately $1.8 million of $6 million.
Can I speak to an attorney/my financial advisor/my accountant about an Owner Loan?
Please do! Speak with any representative that you wish, and we are also happy to connect with those representatives with your permission to answer any questions they may have. Although the Prospectus is a confidential document intended only for current Owners with a primary residence in Illinois, you may share the Prospectus with a representative in order to help you evaluate the opportunity and risks of the Owner Loans.
How is the interest on the loan treated for tax purposes?
Our accounting team confirmed that interest will be compounded annually, and principal and interest returned in a single payment at the end of the term. A 1099 will be issued for the interest in the year of payback. We are willing to discuss other tax arrangements if a lender has a particular question.
Is there a deadline for making a loan?
The campaign will wrap up by the beginning of June and we'd love to have all loans closed by then. The sooner we reach our Owner Loan goal of $1.8 million, the sooner we can get the additional bank funding we need to start the build-out. In addition, in order to spread out our repayment obligations, we have a limit to the amount of loans that can be made in each available term. If you want to be assured of getting the term that works best for you, we will hold your place if you pledge your loan now - giving the amount, term and interest rate - even if you have to send the money a little later.
I want to do something, but I don’t have the minimum investment amount!
There are a number of ways for you to participate:
1. You already participate by being an Owner and paying for your Ownership share. If you have not paid your share in full, it is very helpful if you finish that during our capital campaign. If you’re a Founding Owner, you may also consider upgrading to the Cultivating Owner level. (email [email protected] to make this change)
2. Telling everyone you know that we need their help to get our new store financed would be a big help! Have them call or email the Co-op for more information or if you’d like to give us their name and number we can call them.
3. Buy gift Ownership shares for friends and family (on the Shop tab of our website).
Unfortunately, we have very little time to secure the financing and move forward, and if we lowered the minimum, it would take us much longer to raise the money.
What happens to my loan if I die?
Your loan is part of your estate and is treated like the rest of your assets. Consult with your financial advisors about it.
What happens if I need the money back early?
You should not expect to get the money back early. You can contact the Board should you have an extreme circumstance; any early return is always at Board discretion.
Email [email protected] for more information or to make a loan.