Funding Sources

Below are some resources for farmers trying to finance their ventures. Whether you’re established, starting up, or still dreaming: there’s funding out there, waiting for you to find it.

Really?

We know there are a lot of horror stories out there, too: stories about banks denying loan funding, about credit card debt weighing you down, about being unable to convince the right people of your promise. These stories are valid and true, but they don’t have to be the final word. There are still more options for an applicant to leverage the knowledge and the networks critical to accessing investment. We’ll say it again: the funding is out there somewhere. The tricky part is figuring out where to look, how to prepare, and how to present yourself in order to connect with a funding match that’s right for your current reality and your future goals.

Here’s our take on a few ways towards finding a sustainable, financing solution for your business.

• Introduction- make it easy for people to give you money and take the road less traveled
• Nationwide resources
• Northeast resources
• Raising money without debt or selling equity
• Tips for the road

Make it easy for people to give you money.

Do the work for them: speak their language so they don’t have to learn yours. You might not think of yourself as a “business” person, but taking the time to think through how you will achieve your goals, and turning that into a concrete business plan, is essential to communicating your identity and why you’re worth the risk. Keeping track of your financial records is also critical to fleshing out your track record, to show how you’ve succeeded in the past.

I recently got a call from a client who wants to grow her business and has people who want to invest. She has the business plan and the numbers have been crunched.  But when I opened the files, it was a challenge for me to figure out what was going on. It would take some serious motivation on my part to figure it out — and I was already committed to working with her.  For the investor, there’s only a whisper of a chance of getting repaid, and if they have to work that hard just to figure out if it’s a good deal, chances are they won’t read the application.

Crunching those numbers might be boring, even intimidating, but it’s how you’ll prove you know what you’re doing, and can take on an even bigger challenge. (You don’t have to go it alone, though: seeking out technical assistance to develop your business skills and your investor-readiness can be an important step, and we’re here to help!)

Take the road less traveled.

Much of the difficulty in obtaining funding for farms reflects the fact that traditional lending institutions often don’t have a good or up-to-date understanding of the sustainable food world. For that reason, think about seeking out an institution that focuses on sustainable investment, or even more specifically on farm- related enterprises.

Some of our favorite nationwide resources are:

• Accion ”specializes in working with small business owners who cannot borrow from the bank due to business type, a short length of time in business, or an insufficient credit history.” They offer business loans up ranging from $500 to $50,000, tailored to a variety of business scales and stages, ranging from start-ups to established loans. Additional opportunities include a program for women entrepreneurs, and another for all food and beverage entrepreneurs through a partnership with Samuel Adams called the “Brewing the American Dream” fund.
   
• The federal government’s Small Business Administration offers this handy tool to match you with appropriate grant and loan funding in your state. Thanks, Uncle Sam!

The Northeast particularly offers a wealth of alternative resources, especially for small farm businesses. We recommend looking at what these organizations have to offer:

• Massachusetts Growth Capital Corporation: for capital needs under $10,000, these folks will connect you with microlenders, and hosts an independent loan program for loans over $100,000. For more information from Mass GCC, get in touch with their Senior Loan Officer, José Luis “Pepe” Rojas (617-337-2815), and tell him we sent you!
   
• The MassDevelopment/The Carrot Project Small Farm Loan Program: in their words, it’s “is designed for small Massachusetts farms having difficulty obtaining credit for projects that improve their operations and increase their income, as well as for emergency needs. The fund offers loans of $3,000 to $35,000, and terms of up to 5 years.” With monthly application deadlines!
   
• The Northeast branch of the nationwide SARE (Sustainable Agriculture Research and Education) Program offers various grants, and access to technical support, with deadlines available through the year.
   
• Sprout Lenders: an investment club, Sprout Lenders members pool their funds and accept applications for loans of about $5000 from local, sustainable food businesses. Check them out – there’s an application date mid-January.
   
• The Cooperative Fund of New England offers a range of loan products for cooperatives, nonprofits serving basic human needs, employee owned businesses, and co-housing developments and community land trusts.” Sound like you? Check them out!
   
• The Fair Food Fund Northeast, as described by its Program Director, Alex Linkow: “Our mission is to support the financial viability of small and medium-sized, sustainable Northeast farms by investing in the development of viable, resilient regional food infrastructure that improves access to local food for communities of all means. [We] will provide financing to food enterprises that support the linkages between small and mid-scale farms and the growing wholesale and consumer demand for local, sustainably produced food. Specifically, the fund will provide patient loans, royalty financing, and equity capital to growing food enterprises that offer aggregation, storage, distribution, processing, marketing, information technology, or other means of connecting farmers in the Northeast with new markets.”

Social impact investing, such as many of the above groups, can provide a structured environment for growth with lots of resources at their disposal. If that’s not what you’re looking for, there’s a host of even more alternative types of financing that might prove a good fit for your goals, depending on your business model and needs.

How to raise money without taking on debt or selling off equity.

Finally, there are some options outside traditional debt financing structures that are worth considering.

• If getting a big loan seems impossible, how about thousands of tiny ones? Web-based crowd-funding platforms such as Kickstarter, Kiva, etc, allow you to make your case to the public, and combine individual donations (often in exchange for small compensations at each donation level) to make a big impact. One of our favorites is Three Revolutions, a crowd-funding platform that focuses exclusively on sustainable food business.
   
• For farms, consider offering a multi-year CSA. Just like regular CSA, offering “shares” in the form of produce over the course of several seasons or even several years can help create financial stability and also build a longer-term relationship with your customers. The University of Vermont has an excellent resource on this model.
   
• Similarly, share leases involve using your product as capital (usually with someone underwriting your business or from whom you’re renting land). While risky if your crops don’t succeed, it can be a great way to substitute missing capital up-front with what you produce over the course of the season.

Some tips for the road:

• Unconventional options should be regarded as complementary to more standard models. Consider deploying them in concert with traditional loans and government financing, such as USDA grant programs, etc.
   
• Alternative financing may come with higher or different costs to implement, both for you and for your funding match. It will take extra time to figure them out, and require extra services from your provider to tailor a structure to your needs.

Julia Shanks consults with food businesses and farms, helping them maximize profits and streamline operations through business planning, feasibility studies and operational audits.  She is also the co-author of The Farmer’s Kitchen: The Ultimate Guide to Enjoying Your CSA and Farmers’ Market Foods.