Cooperation New Orleans is launching a cooperative loan fund to provide non-extractive loans to cooperative businesses in New Orleans. We are thrilled to be building a community loan fund through our peer membership relationship with Seed Commons--a national cooperative building sustainable local economies through non-extractive lending. Our Loan Fund team is made up of members of cooperation New Orleans, who are building the administrative foundation necessary to begin the lending process. Guided by our values and the Seed Common principles, loan officers provide technical assistance for coops to develop business planning and democratic governance toward worker ownership and sustainable productivity.
What is Non Extractive Finance?
Non-extraction is defined simply as the returns to the lender not ever exceeding the wealth created by the borrower using the capital. This is often colloquially said as “a borrower will never be worse off than before working with us.” (Source)
We recognize that in traditional lending models, high interest rates and other discriminatory factors are often to the benefit of the lender, and of devastating detriment to the borrower. Non-extractive finance aims to benefit the borrower and play a role in a broader vision of creating bottom-up economies. Read more about it here.
How does a Cooperative Loan Fund Work?
Loan Funds raise capital through investors and donations--or parent cooperatives such as Seed Commons--in order to redistribute that wealth in the form of loans, technical assistance, and business development to local cooperative businesses and projects. An existing / start-up cooperative business is approached or applies for a loan, at which point they are walked through a loan memo to assess feasibility and work together towards approval. Interest rates are low, non-compounding, and paid to support the ongoing technical support provided by the loan fund. The loan fund remains accountable to the success of the borrower--repayment is achieved together.