Capital for Cooperatives Act

On May 20, 2021, Senator John Hickenlooper introduced four bills in Congress to help underserved individuals, communities, and small businesses, including the Capital for Cooperatives Act (S.1736) (the “Act”).  The Act would amend lending criteria for certain Small Business Administration (SBA) loans for cooperatives.  The SBA would be able to consider a cooperative’s proof of its ability to repay the loan based on equity, cash flow, and profitability to determine lending criteria.  The SBA would also be able to establish new lending criteria so long as the criteria are not based on a personal guarantee or an entity guarantee.

These changes to the SBA’s lending cooperative would make it easier for cooperatives to access the SBA’s 7(a) loan program, which is the SBA’s primary program for providing financial assistance to small businesses.   The SBA currently requires a personal guaranty or entity guarantee, which is not compatible with the typical cooperative’s businesses model and which historically has resulted in cooperatives being excluded from access to the 7(a) loan program.