---
title: Chobani Was Built on a Small Business Loan. Here's Why It Worked.
description: Discover how Chobani successfully leveraged a small business loan by aligning people, processes, and systems, ensuring sustainable growth and profitability.
image: https://hello.cpanguyen.com/hubfs/AI-Generated%20Media/Images/Modern%20Yogurt%20Facility%20With%20Worker%20And%20Team.png
---

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 October 2, 2026

# Chobani Was Built on a Small Business Loan. Here's Why It Worked.

 By  [NCO Team](https://hello.cpanguyen.com/blog/author/nco-team)  ·   5 minute read

**Key Takeaways**

- **Match the loan term to the purchase's life.** A 10-year oven belongs on a 10-year loan, so the payments never come due before it has earned enough to cover them.
- **Pay for growth with cash your business already makes.** Chobani's one bad loan came when it grew faster than its sales could fund and had to borrow expensive money under pressure.
- **Line up the people before you sign.** A purchase only pays for itself once someone skilled is running it, so know who that is and how soon it will cover its payment.
- **Aim for more than $1.25 in cash for every $1.00 of loan payments.** That's the minimum lenders want. Check that you'd still clear it if sales dropped 20%.

## **Why Chobani's Loan Worked**

In 2005, Hamdi Ulukaya bought a yogurt plant Kraft had shut down, using an SBA loan of about $700,000. Five years after launch, Chobani was doing about a billion dollars a year.

Plenty of owners take out a loan that size and end up buried by it. If you're weighing a loan right now, the real question isn't whether the rate is good. It's whether your business is ready to make that money earn more than it costs.

At NCO, we look at almost every business problem through three lenses: People, Process, and Systems. Who's doing the work, how decisions get made, and what tools keep it on track. Chobani's loan worked because all three were in place. Here's what that looked like, and how to check your own.

## **The Plant Was Worth What Its Operators Knew**

Kraft wasn't selling that plant because it was a great asset. It was selling it because it wasn't making anyone money.

Ulukaya started by hiring people who could change that. He brought back several workers Kraft had just laid off and hired a master yogurt maker. They spent about 18 months perfecting the recipe before launch.

Remember that a new asset only pays its loan once someone runs it well. If you buy equipment nobody on your team can operate, then capacity is limited; meanwhile, loan payments stack up.

Chobani also worked to keep those experts and competent staff with benefits. In 2016, Ulukaya gave employees shares worth up to 10% of the company. Small businesses can do a version of this without giving away ownership. Two common ways are phantom equity, a bonus tied to the company's value, and profit interests, a share of future growth. Both need careful setup, so get advice as part of your planning.

**For your loan:**

- Name the person who will run the new oven, truck, or location before you sign.
- Estimate how many months it will take to earn enough to cover its own payment. Make sure your current cash covers you until then.

## **The Rules Chobani Followed**

Good borrowing is a process, not a single decision. Chobani followed three rules:

**Match the loan to what it buys.** Ulukaya used an SBA 504 loan. That's a government-backed loan for fixed assets like buildings and heavy equipment, with a fixed rate and a term of 10, 20, or 25 years. He borrowed long-term money for a plant that would produce for decades.

A 20-year asset on a 20-year loan works. The same plant on an 18-month loan would have caused major issues for him at any interest rate, because the payments would have come due long before the plant earned enough to cover them. The long term also kept payments low during those 18 months of recipe work. That's People and Process working together.

This mismatch is behind many of the debt problems we see. It gets worse when short-term money covers losses, then there's no asset at all, and the loan is all that's left.

**Check coverage before you compare rates.** Your debt service coverage ratio shows how easily your business covers its loan payments. Divide your yearly operating cash flow, the cash your business brings in from normal operations, by your yearly loan payments, including the new loan. Most banks want at least $1.25, which means $1.25 in cash for every $1.00 in payments. Then rerun it at 80% of your current revenue. That result tells you what you can carry.

**Pay for growth out of sales.** Once Chobani took off, it paid for expansion mostly from its own sales instead of selling shares to investors. Growth paid for by sales only happens when the business can afford it. It also builds discipline because no outside money covers a sloppy month.

## **Own the Machine, Watch the Numbers**

Many food brands pay a co-packer, a company that makes the product for them, which is cheaper to start, but also means your biggest cost is someone else's income.

Owning the plant gave Chobani control of its cost of goods, meaning what it costs to make each product. The plant was the system that set quality, timing, and margin, and the loan paid for it.

In a small business, systems are how you see whether a loan is working:

- **Track the asset's income separately.** Set up the new equipment or location as its own class or location in QuickBooks, so you can see the month it covers its own payment.
- **Build a short cash forecast.** A 13-week cash flow view shows upcoming payments against expected cash before a tight month surprises you.
- **Recheck coverage every quarter** using actual numbers. Many loans require an annual coverage report anyway, so you'll want these numbers ready.

## **Where It Broke: Chobani's Expensive Loan**

Chobani didn't get every decision right. It grew fast and opened a large new plant in Idaho in 2012. In 2013, it recalled yogurt linked to mold at that plant. In 2014, under cash pressure, it took a $750 million loan from investment firm TPG, on expensive terms. It took about two years to pay its way out.

Seen through our three lenses, the problems stack up quickly. On process, growth got ahead of what sales could fund. On systems, quality control at the new plant didn't keep up. On timing, the loan came under pressure rather than from a plan.

The warning signs are ones any owner can spot: expensive money, a short deadline, and no time to compare options. SBA programs are slower and come with real paperwork, but their terms are much better than fast loans. Start the process while your numbers are strong.

## **Examples**

### **A Costa Mesa bakery**

A bakery with $900,000 in revenue wants a $150,000 oven that will last about 10 years. It brings in $120,000 in operating cash flow and pays $40,000 a year on other loans.

- **Process.** A 3-year loan at 9% costs about $57,000 a year, which brings total loan payments to $97,000. Coverage would be $1.24 for every $1.00 in payments ($120,000 ÷ $97,000), below the $1.25 banks want. A 10-year SBA 504 loan at 7% costs about $21,000 a year, for total payments of $61,000 and coverage of $1.97. The owner takes the 10-year loan. In a bad year, cash flow drops to about $75,000 and coverage falls to $1.23, so she builds a cash reserve from sales before signing.
- **People.** The oven needs a second baker. She hires one with commercial oven experience and lines up wholesale orders first.
- **Systems.** She tracks wholesale as its own class in QuickBooks. By month three, she can see the oven covering its $1,750 monthly payment.

## **What's Different in California**

- **Equipment write-offs don't match.** Federal rules often let you deduct equipment in the year you buy it. California caps that deduction (Section 179) at $25,000 and doesn't allow bonus depreciation. Your state return may spread the deduction over several years, so plan for a higher California tax bill than your federal return suggests.
- **Equipment gets a property tax bill.** If your business equipment totals $100,000 or more in cost, you'll generally file a Business Property Statement (Form 571-L) with your county assessor each year. The bakery's oven counts toward that total.

## **Quick Checklist**

- **People:** Do you know who will run what the loan buys, and when it will cover its own payment?
- **Process:** Does the loan term match how long the purchase will produce income?
- **Process:** Is your coverage ratio above 1.25 with the new payment, and still above 1.25 at 80% of revenue?
- **Process:** Are you borrowing because you planned to, not because you're under pressure?
- **Systems:** Will your books show the purchase's income separately, so you'll know when it's paying for itself?

If you answered no to two or more, start with fixing them before taking on debt. 

## **Ready to Borrow With Confidence?**

Before you borrow, talk to NCO. We'll run your coverage numbers, check the term against what you're buying, and set up your books so you can see the loan working.

[**Book a FREE Initial Consult.**](https://hello.cpanguyen.com/contact-us)

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