By Juliana Broad with the Next System Project
Excerpt: Recent pro-cooperative policy changes in Berkeley, California have given rise to what could be heralded as a new “Berkeley Model” of cooperative economic development. In February, the city council unanimously adopted a set of recommendations that will support the development of worker co-ops in the city. The city council’s resolutions include giving worker co-ops preference for city contracts, providing technical assistance for existing small businesses to convert into worker co-ops, and implementing a workaround so that worker co-ops can access the city’s revolving loan fund.
The council’s workaround deserves some attention. Revolving loan funds are pools of money sustained by the U.S. Economic Development Administration that can be extended as lines of credit to businesses that have been turned down by loans elsewhere (for example, by “risk-averse” private banks). Like most small-business lenders, revolving loan funds normally require an individual associated with the business to personally guarantee to repay the loan if the business defaults. Rather tellingly, this requirement is at odds with the multiple-owner model of a worker co-op. The Berkeley City Council’s innovation—developed in conjunction with the Oakland-based Sustainable Economies Law Center—makes it easier for worker co-ops to access these loans by adding an alternative to the conventional individual guarantee. Given that there are more than 500 other revolving loan funds across the country, there will be plenty of opportunities to replicate and build off of the framework established with the “Berkeley Model.”
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(Originally published December 19, 2019.)