Evidence shows that worker ownership makes a difference in the home care sector. In an industry plagued with high turnover and low wages, worker-owned home care cooperatives have about half the turnover rate of other firms, and pay almost $2 an hour more than comparable firms that are not cooperatively owned. Lower turnover means better care for clients. Higher wages, plus the other benefits of a cooperative such as having a say in what goes on, mean higher quality jobs for caregivers.

Yet, as beneficial as employee-owned businesses are for their workers and communities, they remain difficult to finance. Low-wage workers do not typically have the wealth to purchase stock or offer collateral themselves, and service-sector industries have very little hard collateral to offer a traditional lender. Loans from the Fund for Jobs Worth Owning are flexible and tailored to fill this gap, providing a crucial part of the financing needed to stabilize and grow these valuable businesses.

A recent example is Heartsong Homecare Cooperative. Encouraged by the success of the four other home care cooperatives currently operating in Washington State, a committed group of caregivers in eastern Washington wanted to start their own home care cooperatives to serve rural Skagit and Island counties. Heartsong came to FJWO with a strong business plan and experienced management team as well as a core group of caregivers ready to serve the community. The workers only needed start-up capital to get off the ground, provide those early-stage funds to pay caregivers, staff the office, and invest in marketing to build the business.

FJWO partnered with two other community-based lenders to put together the deal. Since equity was limited, all of the lenders stepped up to offer payment flexibility, including 6-12 months of interest-only payments. FJWO did this as well, but also added an extra element of flexibility to the loan. Given the uncertain nature of a start-up business in a new market, the FJWO gave the borrower the option to defer all payments of principal and interest for up to two years. If their business is ready, the co-op has the option to lower their interest rate by beginning principal payments before the deferral period is over, but exercising that option is entirely up to them. This aspect of the loan gives Heartsong leaders breathing room to manage cash flow, make necessary adjustments to their business plan, and fund capital needs that might arise during those crucial early months.

Many lenders require personal guarantees for small business loans like this. But for a collaboratively-owned business like a cooperative—particularly one owned by low-wage workers—a personal guarantee is not the best way to make sure a loan is repaid. Instead, FJWO substitutes a disciplined system of ongoing reporting of key business metrics to signal when early intervention is needed, and help us work with borrowers to remain on track.

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