How we funded the new Red Emma’s

by John Duda, Red Emma's Collective Member

When we opened the original Red Emma’s almost nine years ago, we really didn’t in the grand scheme of things need that much money to get started.  We got off the ground with a couple of thousand dollars in generous and largely unsolicited donations, some personal contributions by collective members, and a few benefit screenings and concerts—including, incidentally, the very first event we ever did in St. John’s Church, the beginnings of a partnership that would eventually result in our community events venue project 2640.  This small amount of money, along with some DIY ingenuity and persistence in attending restaurant auctions, was all it took to get the doors on our small basement storefront open.

Our new space, however, has been an entirely different proposition. 

 At six times the size, with extensive renovation work combined with a commercial kitchen buildout and a major stock expansion, there’s no way we were going to fund this by digging in the couch cushions.  Despite our best intentions as committed anticapitalists, we found ourselves about a year ago in the position of really needing some capital!  

The question was—how could we make that happen?  It wasn’t impossible—with nine years of steady business activity, however modest, we probably could have snagged an SBA-backed loan or even a regular business loan from a commercial bank.  But from the beginning, we knew we wanted to take this option off the table if we could; for one thing, we know exactly what the big commercial banks did to Baltimore City; from the subprime crisis to the LIBOR scandal, we couldn’t in good faith hitch the entire expansion of our very political project to the increased profits of the ever-concentrated financialized heart of modern capitalism.  And beyond that—all of these “normal” loans come with some heavy strings attached in the form of the need for personal guarantees from a few of our members who happen to have more assets or better credit histories.  Going with a commercial bank would mean that at the very outset our cooperative would be institutionalizing some very anti-cooperative structures, and nine years of working together had taught us just how important it is to avoid these kind of imbalances in power and stakeholding.   

A banking system that would serve the community has long been a dream animating some strands of radical activity—from 19th century anarchist Pierre-Joseph Proudhon’s mutualist “bank of the people” to the agrarian populists who created the (still running!) Bank of North Dakota in 1919.  But in Baltimore City in 2013, this rich history elsewhere wasn’t doing us any good; so we went looking for some real alternative financial institutions capable of helping us make the new project possible.

Like just about everyone else, we of course first turned to the Internet, launching a crowdfunding campaign that raised $30,000, with folks from all over the world swinging us large and small donations in exchange for totebags, free coffee, and the like.  It was a truly amazing show of solidarity and support, that made us believe we really had a huge community behind us—but it still only brought us about a seventh of the way towards what we figured we’d ultimately need.

We turned next to our friends and allies at the Research Associates Foundation, a tremendous small grantmaking resource for Baltimore social justice activists that developed out of the proceeds realized from the closure and sale of the central radical space of a previous generation, the Progressive Action Center.  After much careful discussion about the best way to support us while safeguarding their modest endowment and protecting the viability of their grantmaking program, RAF courageously took the plunge and became our first lender; we now had another $50,000 available to us—and the best part is that when we pay the (low) interest on this loan, that money will fund one of the microgrants RAF makes to activists each year.  In short, we open a radical space, and as we become self-sustaining the kind of activism we like to support gets funded through the repayment of our startup debt.

But that still left us needing to come up with quite a bit more money; we weren’t even half way there.  So we turned to the North Country Development Fund—an incredible project that started in 1978 as a small revolving loan fund among a few Twin Cities food co-ops, that’s grown to be able to provide a total of over $30 million in financing to all sorts of cooperatives.  Best of all, NCDF is itself a cooperative—the projects it funds are also the projects that own it, managing the project on a democratic basis.  In short, it’s a cooperative designed to make more cooperatives.  After a lot of consultation that helped us tighten up our financial projections for the new space, NDCF signed on in support, advancing us another $50,000 in financing.

We knew that even if we continued to get donations and plan fundraisers, we weren’t there yet; and so we turned to a third lender: The Working World, a non-profit lender which got its start helping occupied factories in Argentina keep the doors open.  The Working World’s model is especially interesting politically because it structures debt like an investment: only successful projects pay back into the fund; it’s a model based more in solidarity than purely financial obligations.  The Working World has also been making some exciting loans in the US lately; helping incubate worker cooperatives in devastated parts of NYC alongside Occupy Sandy, and funding the New Era Windows Cooperative, formed by workers from the twice closed-and-twice occupied Republic/Serious Energy factory in Chicago.  The Working World, with it’s connection to coffee growing cooperatives in Nicaragua, was a natural fit for supplying the $25,000 we needed to capitalize Thread Coffee, the new Red Emma’s transparent trade roasting project.

And so with that—along with some of the same cost-cutting strategies that come natural to us as normally pretty DIY folks, we’re almost (if not quite) at our goal.  We’re exploring a line of credit from a local credit union along with some other options, and continuing to welcome any and all donations.  But the bulk of the effort is behind us, and we’ve moved on to mostly worrying about perfecting our vegan spinach pie recipe, building our 12-foot high bookshelves, and lining up customers for our fresh and locally roasted coffee.  And we’re happy to report that 100% of the money we’re borrowing is sourced from ethical institutions we’re proud to be working with; where all our interest payments are going to be funding social justice activism and the development of other democratized economic institutions.