Categories:Funding & Financials
January 9, 2012
Did you know that in the last five years Whole Foods Market – yes, the Whole Foods Market that for the past 30 years has been on the forefront of promoting and selling local products and artisan food items in their stores even before “locovore” became a term every other grocery chain tried to lay claim to – has loaned out more than $6,000,000 to small businesses?
As Heather Kennedy who works on the Local Producer Loan Program at Whole Foods Market explains, the company has always been committed to developing strong win-win relationships with their small vendors. As such, it only made sense for the company to take the next step and offer funding to small businesses that may not always have access to traditional forms of financial capital to help those businesses grow.
“The loans are meant to be relatively small,” Kennedy says, explaining that the loans are typically under $100,000 with an average interest rate of 5%. These loans are specially meant to help small producers or artisans grow their business and in the application process the loan amount requested needs to be tied to capital expenditures necessary to increase capacity or output. For example, Kennedy says that in the past the loans have funded a wide variety of things such as new ovens, a new tractor, or even additional cattle for a farming operation. “These loans are not meant to help with packaging, marketing, startup expenses, or day-to-day operational expenses,” Kennedy explains.
For a business that has its accounting books in order and has spent time preparing the application and all accompanying documentation, Kennedy says that funding decisions are made in about 4 – 6 weeks. While businesses that want to apply for the Local Producer Loan Program don’t have to be current Whole Foods Market vendors, Kennedy recommends that small food businesses that are interested in learning more about the Local Producer Loan Program contact their local store or regional managers. Since Whole Foods Market is so decentralized, even though the loan decisions are ultimately made at the company’s corporate headquarters in Austin, Texas, Kennedy works closely with the local foragers and purchasing managers across the country to learn more about what is going on in that specific market, what customers in that area are looking for, and may even ask the local forager to visit a new applicant’s kitchen or farm. In the case of Benoit de Korsak, maker of St. Benoit Yogurt which has supplied Whole Foods Market since 2006, it was his local forager who actually recommended the Local Producer Loan Program to him.
For Korsak, the loans he’s received through the program have enabled him to grow his company while still staying true to his focus on craftsmanship. Despite strong sales, Korsak had not able to, and is still not able to, secure financing through traditional channels or via small business loans. Korsak explains that in part his inability to get traditional financing is due to the fact that as a small producer he doesn’t have a significant amount of assets to act as collateral for banks. “That’s why the [Local Producer Loan Program] is great for small vendors like us,” he says, “because it’s an alternative to traditional financing. It’s a chance to get financing based on how well your product will do on a commercial level and how much interest there is in your region for the type of product you’re offering.”
While Kennedy says that the majority of loan recipients are either Whole Foods Market vendors or are about to become vendors, being a vendor is not a requirement of the loan program though building a relationship with the local managers in your area can be a huge step towards helping you create a successful loan application. Korsak, who has now been through the loan process twice, encourages entrepreneurs to make sure they develop a product that will sell well locally whether it’s in one of Whole Foods Market’s stores or through other retail channels. “I think the most important thing is to have a project or product that is of great interest to Whole Foods Market,” Korsak says. “Whole Foods Market wants to help you develop a product that will be unique and could ultimately be sold successfully in Whole Foods.” Korsak adds that since Whole Foods Market is invested, literally, in your success and wants you to be able to repay the loan, entrepreneurs within the Local Producer Loan Program also have the ability to tap into Whole Foods Market’s sales and marketing expertise for support.
For more information about how to apply for the Local Producer Loan Program visit the Whole Foods Market website. The website also has information about how to become a Whole Foods Market vendor if you’re interested in learning more about that process.