Loans and Other Financing Options
The most appropriate source of money for a new farm enterprise is your own cash – no loans, no home equity, and no credit cards. Relying on loans substantially (or entirely) puts your farm dreams at too great a risk. It is worth the patience to build up your own farm start-up account.
Only once your products have a clear demand and you are not able to keep up with sales is it time to consider a loan or financing to allow more rapid expansion of the profitable aspects of your farm. If you reach the stage where you’re ready for a loan, you will need to present potential investors or lenders with a solid business plan that exhibits a realistic strategy for paying it off (see Factsheet #32, Business Planning).
Most banks have a commercial lending department to handle business loans, but few banks have an agricultural lending department prepared to work with agricultural business. Check with your bank to see if they write agricultural loans. A partial list of New York banks with known agricultural lending departments includes:
- Farm Credit (multiple branch locations)
- M&T Bank (multiple branch locations)
(800) 724-2440, https://www.mtb.com/personal/Pages/Index.aspx
- NBT Bank, P.O. Box 351, Norwich, NY 13815
(800) 628-2265, http://www.nbtbank.com/home.html
- Community Bank (multiple branch locations)
(800) 388-4679, http://www.communitybankna.com/
- Bank of the Finger Lakes, 389 Hamilton Street, Geneva, NY 14456
(315) 789-1500, http://www.bankofthefingerlakes.com/
Micro-Enterprise Loan Funds or Revolving Loans Funds
Some county governments have micro-enterprise loan funds with attractive interest rates and repayment terms that can be used to finance urban farm operations. Organizations and banks handling microfinancing in New York include:
- Capital District Community Loan Fund, 255 Orange Street #103, Albany, NY 12210
(518) 436-8586, http://mycommunityloanfund.org/
- Alternatives Federal Credit Union, 125 North Fulton Street, Ithaca, NY 14850
(607) 273-3582 ext. 816, http://alternatives.org/
- Cooperative Federal Credit Union (Eastside), 723 Westcott Street, Syracuse, NY 13210
(315) 473-0270, http://www.cooperativefederal.org/
- Cooperative Federal Credit Union (Southwest), 401 South Avenue, Syracuse, NY 13204
(315) 473-0260, http://www.cooperativefederal.org/
- Cooperative Federal Credit Union (Northside), 800 N. Salina Street, Syracuse, NY 13208, (315) 473-0280, http://www.cooperativefederal.org/
- PathStone, 400 East Avenue, Rochester, NY 14607
(585) 340-3300, http://www.pathstone.org/
- Kiva Zip, https://zip.kiva.org/
- CDCLI Funding Corporation, Inc., 2100 Middle Country Road Suite 300, Centereach, NY 11720
(631) 471-1215 ext. 149, http://www.cdcli.org/
- ACCION New York, 115 East 23rd Street, 7th Floor, New York, NY 10010
(718) 599-5170, http://www.accionnewyork.org/
The Farm Service Agency (FSA) also now provides microloans through the Beginning Farmer and Rancher Program. These are direct farm operating loans up to $50,000 with a shortened application process and reduced paperwork and are designed to meet the needs of smaller, non-traditional, and niche-type operations – such as urban farms. For more information, visit the FSA website at http://www.fsa.usda.gov/or call (315) 477-6300. To link directly to the New York State FSA website, visit http://www.fsa.usda.gov/FSA/stateoffapp?mystate=ny&area=home&subject=landing&topic=landing.
With the concept of “Slow Money” (www.slowmoney.org) gaining popularity, investor circles nationwide are forming to fund local food systems. Depending on your location and farm plans, you may be able to attract investors to fund start-up or expansion of your farm. You will need to check in with legal and tax advisors about the implications for your farm, and you will also need to crunch the numbers and write a business plan to determine whether this is a strategy that can work for you. Search online for “slow money”, “local investing opportunity networks” and “small farm angel investors” to learn more about the possibilities for your farm.
Residential Finance or Using Your Own Equity
While many banks are unwilling to lend money to an individual to purchase a herd of goats, for example, almost all banks offer home equity loans and/or other personal loans that you could use for your agricultural business. Home equity and personal loans may carry higher interest rates than business or farm loans available through the above sources. Be sure to check rates and terms. Never finance a business using credit cards as interest rates are enormous and, if payments are not made, can quickly spiral out of control.