Questions and answers about direct loans
Why does MILA need direct loans?
So that MILA can open soon
The money will be used to finance everything needed to open the supermarket. There is still a lot to do before the opening: We have to rent a location and adapt it structurally. After that, the store will be equipped with refrigeration systems, shelves, tills and, of course, the food itself. The direct loans help us to pre-finance this.
Better conditions than at the bank
Bank loans are expensive, especially in the current interest rate environment. Interest rates for bank loans are currently almost 10% per year. The more direct loans MILA receives from members and supporters, the less MILA has to borrow from the bank. Nevertheless, in addition to the direct loans, a bank loan will also be necessary to finance MILA.
Improving MILA’s equity ratio
Direct loans have the advantage for MILA that they can be categorised as economic equity when banks analyse the balance sheet. Direct loans therefore improve MILA’s equity ratio. This in turn makes it easier for MILA to obtain loans at attractive conditions.
What conditions does a MILA direct loan have?
The term of the loan is at least one year. There is then a cancellation period of three months. The annual interest rate is up to 3% in the form of shopping vouchers for the MILA mini-market or, after opening, for the MILA join-in supermarket, or up to 2% annual interest in the form of money. You decide what you prefer and how much interest you would like to receive. Interest is calculated on a pro rata basis from the date of deposit until the following 31 December (date for closing the loan), then annually on 31 December. Due to the administrative work involved in managing direct loans, we are happy to accept direct loans of € 500 or more. The average amount of direct loans to date is around € 3,000.
Where should the money come from?
The members contribute equity by subscribing to cooperative shares (€ 188,000 of which will be available by the time the supermarket opens). The equity is topped up with money from members and supporters through direct loans (€ 550,000) and crowdfunding (€ 32,000 net proceeds). The other necessary funds will be raised through bank loans (€ 250,000).
How much money do we need and for what?
The cooperative’s capital requirements total € 1,020,000, with € 349,000 earmarked for renovation work. Cost estimates were obtained from manufacturers or retailers for all items of the supermarket’s equipment (shelving, refrigeration equipment, etc.), as well as for the merchandise management system and checkout equipment. The remaining costs for IT (€ 39,000) after preliminary work are amortised over 3 years in the financial plan, renovation costs and equipment (approx. € 700,000) over 10 years. The MILA finance working group prepared a detailed business plan over 2 years, which was audited by our auditing organisation Rückenwind.
When do we start using the money?
After we were awarded the contract for the location in Meidling, the money will now be used to renovate and equip the supermarket.
What income do we expect after the opening?
When the supermarket opens, the co-operative will have 1,000 members. The calculation assumes that 70% of the members will be regular shoppers (average purchase of € 135 per month). In addition, each member can appoint a fellow shopper who can also shop. This results in revenue of € 2.2 million in the first full financial year (2026). The gross mark-up across the entire product range will be 30%.
How will sales develop after opening?
The number of members continues to grow after the opening, enabling the company to break even at the end of the 3rd financial year. This is the point at which MILA’s costs are covered and the repayment of loans and credits can begin.
Has the business plan been checked?
The business plan was created by the MILA team. The business plan was based on findings from research with manufacturers and retailers of checkout, refrigeration and shelving systems as well as real developments at MILA and in the minimarket business. Important insights also came from our international role models: the continuous dialogue with their finance teams and the analysis of their economic developments. The business plan was reviewed by our auditing organisation before the cooperative was founded: “The business plan submitted has been carefully researched and prepared and testifies to the expertise of the proponents.”
Download the business plan here. We will be happy to send you the long version of the business plan on request.
What are the risks?
A subordinated loan is a loan in which the lender (possibly you) accepts that it ranks below the other creditors. The lender accepts that if the borrower (MILA) becomes insolvent, they will only get their money back once all other creditors have received their money (“subordination clause”).
In the case of qualified subordinated loans, the borrower (MILA) does not have to pay despite the due date if payment could lead to a serious financial crisis. The lender cannot demand repayment of the loan for as long as it could cause the borrower to become insolvent.
The MILA business plan was continuously developed over 2 years and audited by our auditing organisation Rückenwind. MILA currently has over 600 members (as of 07/2024) and the number is growing all the time. With around 1,000 members at the time of opening and further moderate growth in membership, the economic risk is close to zero according to the current business plan.
Info sheet and opening balance sheet
In order to be well informed about the project, the FMA requires an information sheet in accordance with the Alternative Financing Act for direct loans of € 250,000 or more. This can be downloaded here.
In addition, we provide the opening balance sheet here. The business plan can be downloaded under the question: “Has the business plan been audited?”.
In which stages should the capital be raised?
The common goal of the direct loan campaign is to reach a sum of € 350,000. The aim is to reach 80-90% of this sum by the time negotiations with the bank begin, as direct loans are seen as extended equity and therefore the bank’s risk assessment is much better for MILA. Financing should be secured before a lease is signed for the supermarket.
When will repayment start?
According to the plan, the amortisation of loans and credits begins in the second financial year. This will be financed from the additional own funds of new co-operative members and later also from the surpluses. Repayments to the bank and direct lenders should be fully repaid after the 5th financial year.
What exactly is the MILA direct loan?
The MILA direct loan is a qualified subordinated loan.
A subordinated loan is a loan in which the lender (possibly you) accepts that it ranks below the other creditors. The lender accepts that if the borrower (MILA) becomes insolvent, they will only get their money back once all other creditors have received their money (“subordination clause”). In the case of qualified subordinated loans, the borrower (MILA) does not have to pay despite the due date if payment could lead to a serious financial crisis. The lender cannot demand repayment of the loan for as long as it could cause the borrower to become insolvent. Find out more on the website of the Financial Market Authority (FMA).
Tax consideration of a direct loan?
There is a tax-free allowance of € 730 per year for wage tax payers. If the income exceeds this amount, interest from the direct loan is taxable in accordance with the tax assessment under the Austrian Income Tax Act (personal tax rate of the lender as part of his/her income tax assessment). However, the exemption limit of €730 would only be exceeded with a very high loan of around €25,000.
How do I give MILA a direct loan?
Processing your direct loan is very simple in three steps. You can find all the relevant information here.