Worker Co-ops Fund Themselves, Solve Equipment Crisis

The espresso machine’s motor acted up on December 30th and completely failed three days later. Suddenly, all lattes and cappuccinos, critical to the income of any café, weren’t possible for the worker- and consumer- owned Flat Iron Coffeehouse Co-op.

“This sudden loss of revenue was devastating” said co-founder and worker-member Larisa Demos. Everyday saw a 30% loss in sales and a noticeably different customer satisfaction level amid Flat Iron’s cozy, warmth-filled environment. Flat Iron re-opened in December of 2021 as a multi-stakeholder co-op in Bellows Falls, Vermont.

“We weren’t sure who would assist us as a newer co-op,” said Demos. Flat Iron was particularly vulnerable because it is difficult for co-ops to secure loans without saddling one or two specific members with debt, creating inequity and unequal risk among members.

Flat Iron had an existing loan with Shared Capital Cooperative to finance their conversion. Shared Capital is a cooperative and Community Development Financial Institution that specializes in lending to cooperatives across the nation. Flat Iron is one of 300 member co-ops at Shared Capital.

Timing was of the essence, however, and with revenue drops came pressure to address the issue quickly. Demos contacted the Valley Alliance of Worker Co-operatives (VAWC), a co-op association that supported their conversion.

VAWC is incorporated as a co-op of worker co-ops and supports its members variety of activities including start up and conversion support, marketing, and a loan fund. Flat Iron is a member of VAWC along with other worker co-operatives in western Massachusetts and southern Vermont. After contacting VAWC about the espresso machine failure on January 2, Flat Iron had an approved loan request and funding started processing on January 4 from board and staff.

VAWC is an investor at Shared Capital and sought to ensure a shared strategy to support Flat Iron despite the timing being very challenging. VAWC connected with Flat Iron’s loan officer and built a shared plan on how to have Flat Iron fully functional as quickly as possible. Flat Iron kept their Shared Capital loan and VAWC made a direct loan from their fund for the espresso machine. VAWC issued its loan and Shared Capital provided all the legal paperwork needed to reconcile the two loans for all parties.

Grassroots Economic Organizing readers will recall VAWC’s Interco-operative Loan Fund from a piece in 2019 about a loan to Collective Copies, a VAWC founding member. VAWC’s Fund is based on the Italian model where all co-ops in Italy are required to give 3% of their surplus to a development fund. This financial instrument is part of building one of the largest co-op sectors in the world with 79,000 co-ops employing 1.3 million people earning €130 billion annually*

VAWC’s Fund acts similarly though on a smaller, regional scale. All VAWC members contribute 5% of their surplus to this shared asset. The Fund lends up to $10,000 directly to members and currently has $40,000 invested in co-op funds. Revenue from the Fund goes to educational scholarships for worker members and to assist in staff time. VAWC member co-ops collectively own and control this fund and is part of VAWC’s mission of placing worker co-operators at the decision making table for larger goals like co-op development, financing, legislation, marketing and more. VAWC's loan to Flat Iron was their fourth direct loan to a co-op since it began in 2009. In addition to direct loans, the Fund supported over 80 loans to co-ops last year through its investment in co-op funds.

Members of Flat Iron rejoiced on January 20th when an installed espresso machine poured its first shots and satisfying aromas met a re-energized community on a cold winters’ day. VAWC’s Interco-operative Development Fund shows that despite the competitiveness of the modern economy, the strength of one business can also be the strength of another - it just takes cooperation. Want to know more? Go to valleyworker.coop or email info@valleyworker.coop.
 

Photos by Larisa Demos

* Ammirato, P. (2018). The Growth of Italian Cooperatives: Innovation, Resilience and Responsibility. Routledge, New York, New York.