Finding Common Ground as Cooperatives: NCB Finances New Oregon ACE Hardware Store

The owners of a new Ace Hardware store wanted a bank that understood its business model. NCB was it.

Bryan and Caren Crews are the proud owners of three Ace Hardware stores in Oregon — what Bryan calls the Santiam Canyon community of stores. "We are the only true hardware store operators east of Salem until you get to central Oregon."

Their third store at 210 Main Street in Aumsville opened in February 2021 during a major ice storm that caused much damage to the town. "A lot of people equate them to good-weather businesses, but your local hardware store is a key business to help overcome emergencies and natural disasters," Bryan says. "It turned out to be fortuitous timing that we could serve the community in that way."

Service is something the Crews knows a lot about, having spent their early careers in the healthcare industry—he was director of operations for a long-term care skilled nursing company, she worked in assisted living. When they were looking for their next chapter, they landed on the idea of purchasing an existing Ace Hardware store in Stayton, some 50 miles from their home.

"I said I was never going to work that hard again for someone else and resigned with no other goal than to work for myself," Bryan says. He spent the next seven months researching various industries that played into his background, including agriculture, retail, and electrical, but he says the hardware store checked all the boxes. "So I sharpened my pencil and the numbers panned out and by gosh I've been a hardware guy ever since!"

That it was an Ace Hardware store turned out to be a happy coincidence, as he had grown up with the famous jingle (now updated to "Ace is the place with the HELPFUL HARDWARE FOLKS"), and the brand resonated with him. "Given their emphasis on being helpful, you really do have to serve others, and in serving others you can find success. I think that's cool."

It also meant he would have a built-in support network—Ace Hardware Corporation was founded as a cooperative in 1924 by a small group of Chicago hardware store owners to allow smaller, independently owned stores to compete effectively, and "the level of support by Ace personnel is second to none," Bryan says.

The Crews subsequently converted a True Value Hardware store in nearby Mahema to an Ace Hardware store and then struck a deal to build the store in Aumsville, all within eight miles of each other.

"I had geography in mind," Bryan says. "The ability for my three stores to share products is instrumental to meeting customer needs, whether by transferring them among locations as needed or sending shoppers to other stores that might be on their way home."

Unlike their former two locations, the Aumsville project involved a three-month, ground-up rebuild of an empty 10,156 square foot commercial building into what is now an Ace Hardware with 8,325 square feet of retail space. To help offset the projected $831,000 start-up cost, the Crews turned to National Cooperative Bank for the second time, having partnered with NCB on refinancing the first hardware store in 2013.

Because Ace is a co-op, it was important for Bryan to work with a bank that is also a co-op. "I understand that business model, and likewise NCB promotes, supports, and understands the mission of a cooperative and how valuable these enterprises are."

Sylvia Bettencourt, NCB Vice President, and West Coast Business Development Officer agrees: "We pride ourselves on providing financing to ACE retailers and understanding the Ace model."

In late 2020, NCB provided the Crews with a $300,000 SBA 7(a) loan, the proceeds being earmarked for furniture, fixtures, equipment, working capital, closing costs, and third-party reports. The 10-year term includes interest-only payments for the first six months to allow sufficient time for the store to be up and running and earn enough cash flow.

According to Bettencourt, independent start-ups who lack sufficient liquidity would not be able to qualify for loans from conventional banks, therefore the federal government enticed banks by establishing the SBA program, which provides a 75% loan guarantee.

For the Crews, the SBA loan offered more favorable terms as well as certain benefits because Bryan is a veteran. "I prefer to operate debt-free, but there are times when you need financing and the terms and conditions on the SBA loan fit the business model and the pro forma so we could ensure we had the available capital and cash to service that loan." The process does take longer, but as a preferred lender, NCB is not required to submit the loan package to the SBA for approval, thereby the process is somewhat streamlined.

Even still, Bettencourt says qualifying for an SBA loan still requires the necessary due diligence by the borrower—lenders want to see the amount of effort and dedication they are going to put into the business. "I ask every prospect to submit a narrative, which is what Bryan did—we don't just go with numbers, we go with knowledge, owner participation, and commitment. You should have that in your bio so when you apply for your loan it's already there."

Site selection is critical as is how much cash you are putting into the project. Experience is also key—not only of the borrowers but of the entire management team. "With Ace stores, the staff has to undergo training, and Ace personnel are on-site for the first few weeks after opening, so that gives us extra security. And Bryan is very knowledgeable," Bettencourt says.

Bryan credits his Ace project manager and district manager with helping him navigate the start-up phase, including doing the legwork in sending out bids for an outside merchandising company that assembled all the fixtures and set all the products on the shelves.

"It was definitely an investment, and what part of what the loan covered, but they do a great job. I was there 24/7 every day for three months and lived on site in an RV, and it was so much fun. It seems like a lot of work, but I really enjoy creating something."

The Crews also enjoy seeing how that creation has impacted their community, with convenience being an important component of that—Aumsville Ace serves hundreds and potentially thousands of people that didn't otherwise have a local option. "We are the anchor store of the whole community in this little town, which is undergoing a nice revitalization. The city administrator was very pro Ace and bent over backwards to make it a reality."

The store has also provided employment for ten residents. "Ace has a reputation for having the answers but guess what: Every Ace pulls these people out of their local community, so they are everywhere. There are people willing to help and to serve in every community. Ace is just one awesome way that is happening."

That's a big reason why the Crews are open to expanding the family business, especially now that three of their four adult children are working in the different locations. (Their youngest daughter, a senior in college, is planning to be a doctor. "I think that's pretty cool too.") So far he has ruled out potential opportunities for another Ace store that didn't meet his criteria, but he is continually on the lookout.

Should financing be required, Bryan sees NCB as the ideal partner. "I interfaced with many other banks and none were as receptive and understanding and willing to work with an Ace Hardware purchase or start-up as NCB. The people there were and continue to be very easy to work with and I would definitely work with them again if the opportunity arose."

Bettencourt is equally optimistic about future partnerships, seeing a shift away from big-box stores now that people have experienced their local hardware store during Covid-19. "Ace is able to track returning customers through its reward programs and so far 80 to 90 percent keep coming back."