Shopping for a Business Loan? Try Whole Foods

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By Lily Leung
The Orange County Register

Bees are Bill Walter’s business.

Walter removes and relocates swarms from homes and later tends the bees for their wildflower honey, which he sells through his company, Guerilla Beekeepers, along with beeswax-based products such as lip balm and body moisturizer.

Up until 18 months ago, Walter oversaw his growing venture out of his home garage in Silverado Canyon in southern California.

But thanks to a $15,000 loan from natural and organic foods grocer Whole Foods Market, the former Web designer was able to buy new gear, including additional bee suits and hive boxes.

That financial help also made it possible for him to move to a larger space, a 2,400-square-foot warehouse in Santa Ana, Calif. The loan was “that little extra kick he needed,” said Walter, 49. “We wanted to expand, but we couldn’t do it without (the loan.)”

Walter is one of 150-plus independent business owners across the nation who have received funding through Whole Foods’ program, which since 2007 has supported emerging companies that make local products with loans ranging $1,000 to $100,000.

The grocery chain so far has issued roughly $10 million in low-interest loans, at rates ranging 5 percent to 9 percent, and recently committed to an additional $15 million in funding.

Loans issued in 2012, the most recent year for which numbers were available, averaged a little more than $50,000, while the average interest rate was 5.4 percent.

Whole Foods’ expansion of its loan program comes at a time when traditional bank lending continues to decline.

The value of U.S. commercial loans of $1 million or less, considered a small-business loan, was nearly $285 billion in the third quarter, based on the latest federal data on federally insured banks.

That’s a 13 percent drop from six years ago.

Also, the average size of small-business loans backed by the government has grown over the years, suggesting that fewer smaller firms that want small-dollar loans may be getting help.

In Orange County, Calif., for example, the average loan size has more than tripled to $527,000 since 2007, based on numbers for the U.S. Small Business Administration’s flagship 7(a) loan program.

The drop in traditional lending and the rise of SBA loan sizes have in recent years prompted the rise of alternative lending.

E-commerce site PayPal recently entered the market, making available loans exclusively to certain vendors.

Whole Foods’ loans are not exclusive to its vendors, but such a relationship is preferred, the application says. What is required is collateral, which offsets some of the company’s risk.

“We already know what kind of supplier they are,” said Dwight Detter, a Whole Foods buyer whose focus is Southern California. “There is some track record so that we can help project with them.”

As with a regular bank loan, would-be borrowers must share their financials, such as annual revenues, and the intended use of the money during the application process, which takes about two months.

Getting a loan from Whole Foods isn’t necessarily a better option than getting one from a bank or from the SBA, Detter said.

“I’d call it another option,” he said.

Before the loan, Guerilla Beekeepers had been a Whole Foods vendor for more than year and a half, supplying goods to four of its stores.

The company’s products are now featured in nine locations in California’s Orange and San Diego counties, Walter said.

Within three months of applying for a loan, Walter received a five-year loan with a 6 percent interest rate.

His monthly payments are $289 a month, an amount he found “very attractive” because it’s been manageable to repay.

Walter said he preferred getting a loan from Whole Foods over a bank because he felt a deep connection with the store.

“We have a really good relationship with them,” he said. “I know a lot of the people there personally. I’m not just another face.”
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WHOLE FOODS LOAN PROGRAM:

_Loan amounts: $1,000 to $100,000

_Average loan size, 2012: $50,000

_Range of loan interest: 5 percent to 9 percent

_Average interest rate: 5.4 percent

_Loans issued through local producer program: 155

SOURCE: Whole Foods