Finding financing for a small farm is one of the most challenging obstacles for agricultural entrepreneurs. There aren’t many options, the options that exist are often reluctant to invest in agriculture, especially in beginning farmers, and few farmers have the experience and specialized knowledge to assemble a loan application with ease. The following resources include traditional and creative ways to finance your farm, as well as pointers for preparing a successful loan application.
Government Financing Programs:
- Farm Credit Services (FCS) – a network of borrower-owned lending institutions and supporting organizations that specialize in loans to farmers and ranchers. See also FCS’s financing options for Young, Beginning, Small, and Minority Farmers, including: loans for real estate purchases; credit for operating expenses; financing for livestock and machinery; and refinancing. See the AgVision program, which offers financing with less restrictive underwriting standards, the JumpStart program which funds working capital up to $100,000, and the RateWise program, which offers interest rate discounts for participation in subsidized financial educational programs.
- Farm Service Agency (FSA) – makes direct and guaranteed farm-ownership and operating loans to family-size farmers and ranchers who cannot obtain commercial credit from a bank, FCS institution, or other lender. FSA loans can be used to purchase land, livestock, equipment, feed, seed, and supplies, or used to construct buildings or make farm improvements. To find out more about the program, contact your local USDA Service Center by clicking here>>> Read also the Farmers’ Legal Action Group’s (FLAG’s) Farmers’ Guide to FSA
- USDA Microloan Program – loans of up to $35,000 are specifically for small farmers, veterans, and disadvantaged producers. Apply through your local FSA office.
- USDA Rural Development Single Family Housing Programs provide homeownership opportunities to low- and moderate-income rural Americans through several loan, grant, and loan guarantee programs. The programs also make funding available to individuals to finance vital improvements necessary to make their homes decent, safe, and sanitary.
- Conservation Loan Program: administered by FSA, this program provides direct loans of up to $300,000 (not currently available) and guaranteed loans of up to $1.2 million. The Conservation Loan Program includes a priority for loans to beginning farmers and ranchers and socially disadvantaged farmer or ranchers. However, USDA’s regulations for the program also provide an advantage to wealthier farmers and ranchers in the form of a streamlined application for loans and the waiver of FSA’s normal requirement that borrowers cannot own larger than family sized farms.
- Rural Energy for America Program (REAP): provides guarantees to commercial lenders on loans for the purchase and installation of renewable energy generating systems or energy efficiency improvements. This assistance is limited to loan to small businesses and farmers & ranchers. Projects must be located in a rural area. There is an exception for ag producers. REAP guaranteed loans may finance up to 75% of such a project.
- Rural Energy Efficiency Loan Program: developed in 2014 to help lower electricity rates in partnership with rural electric cooperatives.
For federal grants, see our Grants page>>
The 2013 Oregon Legislature passed Oregon’s first loan program for farmers and ranchers, called Aggie Bonds. Aggie Bonds use the state’s federal bonding authority to make interest on loans to qualifying farmers and ranchers income tax-free to the lender. This, in turn, reduces the lender’s total interest rate by about one quarter (e.g., an 8% interest rate becomes 6%). Loans can be for farm land, farm improvements, or new and used depreciable property. This program is anticipated to be available by April, 2014. The Aggie Bonds program is administered by the state agency, Business Oregon, which administers other programs that farmers might qualify for, including:
- The Entrepreneurial Development Loan Fund (EDLF) – direct loans of up to $50,000 to start-ups and small businesses that have either made less than $500,000 in the past 12 months, or are owned by a severely disabled person.
- Capital Access Program (CAP) – creates a loan loss reserve account that the lender can apply future losses against. This assurance of payment helps borrowers get their foot in the door of traditional financing institutions. Most loans and lines of credit enrolled in the program are under $100,000, and there is a 3% enrollment fee.
- Credit Enhancement Fund (CEF) - a loan insurance program that, like CAP creates access to financing for borrowers who might not otherwise qualify for traditional financing. The average request is between $300,000 and $400,000 and the enrollment fee varies between 1.5 and 6%.
- Oregon Business Development Fund – a direct loan program that gives preference to companies 1) with 100 or fewer employees, 2) in rural or distressed areas, 3) that exports some goods out of state. Loans are limited to $700,000.
What are other states doing?
- 38 states have active state-level economic development tools specifically for farmers.
- Beginning Farmer Tax Credits – Iowa and Nebraska offer a tax credit to landowners who lease their land, depreciable machinery, breeding livestock, and/or buildings to beginning farmers.
- The Bank of North Dakota (BND) is the only publicly-owned state bank in the US. The state deposits all of its money (except pension funds) with BND. Local banks originate the loan, then invite BND to finance a portion of it. BND is run as a for-profit and has generated over $300 million in profit for the state’s general fund over the last decade. To read more about the BND, click here>>>
Oregon Community Banks & Credit Unions with Above Average Ag Lending:
|Rank||Oregon Headquartered Banks||Total assets (000s)||Total ag loans (000s)||Ag loans as % of bank assets||Branch Locations|
|1||Bank of Eastern Oregon||$252,007||$99,919||40%||Gorge, Eastern|
|3||Centerpointe Community Bank||$77,362||$13,309||17%||Gorge|
|4||Citizens Bank||$428,525||$69,100||16%||Salem/McMinnville, Corvallis/Albany, Eugene/Springfield, PDX|
|5||Willamette Community Bank||$80,424||$7,130||9%||Corvallis/Albany|
|6||Washington Federal||$860,000||$54,137||6%||Central, Southern|
|7||Oregon Coast Bank||$158,265||$9,358||6%||North Coast|
|8||Columbia Bank||$2,458,268||$123,013||5%||North Coast, PDX, Salem/McMinnville, Eugene/Springfield, Central|
Community Development Financial Institutions – Lenders with Extra Programs/Flexibility:
- Albina Opportunities Corporation – PDX Metro businesses owned by women, minority and immigrant populations, as well as business operating in low-to moderate-income census tracts.
- Craft 3 – Statewide lending and business assistance to entrepreneurs, non-profits, individuals and others who don’t normally have access to financing in order to strengthen economic, ecological and family resilience.
- MercyCorps NW – Assists low-income current and aspiring small-business owners throughout Oregon and Washington to increase economic self-sufficiency and community integration through microenterprise development and self-employment.
- One PacificCoast Bank – Operates from a triple-bottom-line measuring its financial, social and environmental impact to meet the needs of its communities.
Individual Development Accounts (IDAs):
IDAs are partially federally-funded programs that match participants’ savings for qualifying investments in home ownership, education and small business. Qualified small business expenses are asset purchases, including capital, plant, equipment, working capital, inventory and/or licenses, but not real estate. Match ratios and caps on total savings vary depending on the IDA provider. The matched savings are held in a separate account from the participant’s account. When the IDA participant has accumulated enough savings and matching funds to purchase the asset (after 6 months, but no later than 5 years) and has completed all required financial education courses, then the participant can arrange for payments from the matched account to be made directly to the vendor for the qualifying asset(s).
The applicant must be working-poor (eligible for TANF or EITC, or have an income that is equal to or less than 200% of the federal poverty level). Applicants must complete financial education courses, and create a business plan while they are saving.
Oregon offers Income Tax benefits for participants in IDAs. Oregon allows a subtraction on your tax return for deposits into your IDA through the Neighborhood Partnership Fund, and qualifying withdrawals are tax-free (ORS 316.848). To read more, click here>>>
Listed here are some providers of small business IDAs in Oregon.
- Valley Individual Development Accounts (VIDA) works with 42 partner organizations providing IDAs with a 3:1 match in 31 Oregon counties. VIDA is administered by CASA of Oregon. Some of VIDA’s participants offering IDAs for small business are:
- Adelante Mujeres (administered by Adelante Mujeres) – Maximum savings are $12,000 ($3,000 personal savings + $9,000 matched funds). Serves Washington & Yamhill Counties.
- Food Roots – Personal savings are a maximum of $1,000 per year for no more than three years. Maximum total savings are $12,000 ($3,000 personal savings + $9,000 matched funds). In Clatsop & Tillamook Counties.
- Hacienda CDC in Multnomah County
- Housing Authority of Jackson County (HAJC)
- Illinois Valley Business Entrepreneurial Center (IVBEC) in Josephine County
- Microenterprise Services of Oregon (MESO) in Multnomah & Washington Counties
- Mid-Columbia Housing Authority in Hood River, Sherman and Wasco Counties.
- Northeast Oregon Economic Development District (NEOEDD) in Baker, Union & Wallowa Counties
- Salem-Keizer Community Development Corporation (SKCDC) in Benton, Lincoln, Linn, Marion, Polk & Yamhill Counties
- Willamette Neighborhood Housing Services in Benton & Linn Counties
- Entrepreneurial Development Services (eDev, formerly Lane Microbusiness) – Participants are required to write a business plan, take a financial literacy course, and complete 30 hours of training in addition to their savings. Maximum savings that is matched is $1,334, which is matched with $4,000.
- MercyCorps Northwest – Statewide. 3:1 match with maximum savings of $1,334, matched with $4,000.
- Native American Youth and Family Center (NAYA) – Statewide. 3:1 match
- NeighborWorks Umpqua (Formerly Umpqua CDC) – Klamath, Lake, Jackson, Josephine, Douglas, Deschutes, Crook, Jefferson. Offers a 3:1 match, with maximum $2,000 savings, for a $8,000 total. Click here to find the Dream$avers program in your county, or find it below:
- Access Helps – Jackson & Josephine Counties
- NeighborImpact – Deschutes, Crook & Jefferson Counties
- South Central Oregon Economic Development District (SCOEDD) – Klamath & Lake Counties
- Warm Springs Community Action Teams (WSCAT)
- Seeds of Success – Washington State
- NOTE: the Beginning Farmer and Rancher Individual Accounts (BFRIDA) Pilot Program was created in the 2008 Farm Bill as an IDA program specifically for beginning farmers and ranchers, however the program has yet to receive funding. Read more about it here>>>
If your non-profit or state, local, or Tribal government is interested in using available federal funds to create an IDA through the Assets for Independence program under the US Department of Health & Human Services, click here for more information.
- Business Loan Funds offers a loan of $1,000 – $35,000 to Oregon businesses in Eugene, Junction City, Veneta, Cottage Grove, Florence, McMinnville, Burns, La Grande, Warm Springs Indian Reservation, and Enterprise.
- Small Business Administration (SBA) provides short-term loans of up to $50,000 (averaging $13,000/loan) to small businesses through intermediary lenders. Loans may be used for working capital, inventory, supplies, furniture, fixtures, machinery and/or equipment, but may NOT be used for real estate, lease improvements that cannot be relocated, or re-financing debt. Click here for an easy to follow guide to SBA Loans. SBA lenders in Oregon include:
- eDev (Entrepreneurial Development Services, formerly Lane Microbusiness) – average loan amount is $10,000. Their loans are specifically for small business owners who may or may not have good credit, or have other barriers to a traditional bank loan.
- Equity Trust makes loans that 1) Assist in the permanent protection of land and/or buildings for agriculture, affordable housing, community economic development or other community need; 2) Support the economic vitality of CSA farms or the economic success of projects protecting the affordability and use of land and/or buildings for community benefit; 3) Directly or indirectly enable land reform and promote alternative ownership models. Loans are for between $5,000 and $150,000 with interest rates typically between 5% and 7% and a term of up to 5 years.
- Oregon Association of Minority Entrepreneurs (OAME) offers loans of up to $35,000 with 6.5-12% interest rates to small businesses that have been in operation for at least 3 months and are ineligible for traditional bank financing.
- Micro Enterprise Capital Access Program (MCAP), the financing arm of Micro Enterprise Services of Oregon (MESO), offers loans of up to $50,000 (although most range from $5,000-$20,000) with interest rates of 4.25-8% to small businesses in Multnomah, Clackamas, Washington or Columbia Counties that have been in active operation for at least six months.
- MercyCorps Northwest – provides loans from $500 to $20,000 for new businesses, and up to $50,000 for businesses in operation for more than one year, with fixed interest rates between 8 and 12%. Qualifying applicants are small businesses in Oregon and Washington who may not qualify for traditional loans.
- Local Producer Loan Program – Whole Foods Market offers loans between $1,000 and $100,000 (maximum $25,000 for start-ups) with fixed interest rates, currently between 5% and 9%. To qualify, the loan must be for expansion and/or capital expenditures, not operating expenses.
- Farmer Loan Program (Portland-area) – People’s Food Co-op offers a no-interest loans, averaging $1,000 per loan thus far.
- FACT’s Healthy & Humane Farm Funds Project offers $500-$1,500 per farm for projects designed to either help farms transition to pasture-based systems, or improve their marketing of their humane products, or generally enrich the conditions in which the farm animals are raised.
- Oregon MicroEnterprise Network (OMEN) – offers Capitallink, a revolving loan fund that provides capital access to Oregon communities who have little or no access to loan programs and cannot access traditional financial services.
- Prosper is an online community marketplace for peer-to-peer lending without a middleman. Prosper offers fixed rate, unsecured loans from $2,000 to $25,000 with terms of 1, 3 or 5 years, depending on your “Prosper rating” and loan amount.
- Funding Circle is an online marketplace where people lend to businesses.
- Kickstarter, Kiva, Community Sourced Capital, and Indiegogo are online funding platforms for creative projects.
- RSF Social Finance – an innovative non-profit financial services organization.
- Pinnacle Business Financing – loans for new and used farm equipment, among other loans. Contact Jill Ginn, firstname.lastname@example.org, 800.566.1993, Washington State
- The Carrot Project – four programs designed to make loans to small and mid-sized farms and farm-related businesses that use sustainable or organic practices and serve local or regional markets. Funds can be used for working capital, capital needs sucha as equipment or buildings, or other improvements for production or value-added enterprises. In most programs, value-added enterprises are given preference, but off-farm enterprises are also eligable, providing that inputs are sourced locally.
- Enterprise for Equity – microloans of up to $25,000 for low-income borrowers. Borrowers qualify for larger subsequent loans each time they pay off previous ones. Washington State
- See this Guide to Community Capital for a comprehensive description of the general principles and various types of community capital.
- Slow Money is an investment movement inspired by the Slow Food movement. Their principles include learning “to invest as if food, farms and fertility mattered… [connecting] investors to the places where they live, creating vital relationships and new sources of capital for small food enterprises.” See also Slow Money NW for our local chapter, or Cascadia Foodshed Funding Project, a collaboration of foundation and individual impact investors that makes loans and grants to food and farming businesses, as well as Salem’s local investment group, Salem Sharks. For inspiration from elsewhere, see Northern California’s Slow Money chapter or the small-scale, bottom-up solutions and very successful loan program in North Carolina.
- Ecotrust’s Natural Capital Fund – the nonprofit’s working endowment is invested in local businesses that operate on a triple bottom line.
- Local Investing Opportunities Network (LION) – a community group based in Port Townsend, WA that has implemented numerous local investment projects.
- Springboard Innovation – a Portland-based non-profit with a mission to nurture community-led change. HATCH, a social entrepreneurship incubator, is one of their projects.
- Natural Investments LLC – a very innovative financial advisory firm. Contact Malaika Maphalala at 503.915.0090.
- Fledge LLC – an intensive business incubation and low-cost loan program, Seattle.
- Local Dollars, Local Sense: How to Shift your Money from Wall Street to Main Street and Achieve Real Prosperity – a book.
- See Friends of Family Farmers’ Business Resources>>
- Farm Credit Service’s PowerPoint on how farm lending works and how to use their programs.
- How to Finance a Small Farm – UC Davis Extension publication includes what materials to prepare, what questions to ask, and what questions to be prepared to answer when speaking with the banker.
- Affording Ourland – Financial Literacy for young farmers from The Greenhorns
- Debt.org – Debt help services
- Farm Finances: Organizing and Understanding Your Numbers – a webinar from ATTRA
- Guide to Financing the Community Supported Farm – an excellent resource from the University of Vermont’s New Farmer Project
- Business Financing – small business financing options and resources
- Raising Dough: The Complete Guide to Financing a Socially Responsible Food Business – a book from Chelsea Green Publishing which will be available in the winter of 2012.
- Financing Small-Scale and Part-Time Farms – from Penn State’s College of Agricultural Sciences, Agricultural Research and Cooperative Extension
- University of Minnesota Extension’s Financing Resources
- Farm Finances: Organizing and Understanding your Numbers – webinar from National Center for Appropriate Technology
*Friends of Family Farmers provides these resources solely for educational purposes. Friends of Family Farmers neither favors nor endorses any of the organizations listed on this website, nor are they responsible for any incorrect information that is listed on the hyperlinked external sites.*