Financing the small farm

Microgreens. Yummy!

Microgreens. Photo by ratzelster via Flickr (CC BY-NC-SA 2.0)

Last week, public radio’s Marketplace Morning Report ran a short but informative story from Eve Troeh on the credit problem facing small farms. As host Jeremy Hobson describes in his introduction to the piece, “With the trend toward buying local food from local farms, you’d think it would be easy for local farmers to get some start-up cash. But, it isn’t, so the government is stepping in to help.” As Troeh reports,

traditional farm loans aren’t designed for [small-scale farmers], says Elizabeth Ü, the author of the forthcoming book Finance for Food.

“Financing either goes to very large scale industrial farmers, or primarily to farmers of commodity crops that aren’t even intended for human consumption,” says Ü.

The big banks that loan to big farms aren’t interested in a half-acre of eggplant. And start-up farmers … look too risky for most small business loans.

As Elise Hennigan writes in a lengthier article for the website of KCET public television,

Local food producers face high barriers to entry into the farming profession. Accessing enough land to make reliable profits … is their biggest hurdle. Other small farmers report that securing enough start-up capital is tough (especially for farmers who are starting from scratch rather than branching off from an already established business).

Due in large part to these dual challenges, small farm numbers are dwindling. The number of principal farm operators in the United States who have been in business for less than 10 years has decreased year after year for the past three decades. Similarly, the number of young farm operators has also decreased. In 1982, 16 percent of all principal operators were under the age of 35; by 2007 that number dropped to 5 percent.

To help support young and beginning farmers, the United States Department of Agriculture (USDA) recently launched a new microloan program designed to help small and family operations, including beginning and socially disadvantaged farmers, secure loans under $35,000. To appeal to this target demographic, the program offers an online application, a 1.5% interest rate, and flexible eligibility requirements.

As detailed in the USDA press release about the program,

Producers can apply for a maximum of $35,000 to pay for initial start-up expenses such as hoop houses to extend the growing season, essential tools, irrigation, delivery vehicles, and annual expenses such as seed, fertilizer, utilities, land rents, marketing, and distribution expenses….

Producers interested in applying for a microloan may contact their local Farm Service Agency office.

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