Farmers need capital to secure land and equipment.  While agricultural lenders such as Farm Credit and the USDA Farm Services Agency do offer credit, neither adequately serves farm operators who are perceived as higher risk because they are start-ups, have innovative business models lacking industry benchmarks, or are poorly collateralized.  Meanwhile, community development finance institutions (CDFI) typically have little or no agricultural expertise.

In 2008 the Carrot Project conducted a survey of over 700 farmers in New England and New York State and came to the following conclusions: “It is not only start up farms that have difficulty securing the financing they need. It was also found that businesses operating more than 4 years are facing obstacles to financing as well.”  Cash flow management can also be a challenge for some enterprises that are well-capitalized, especially those with high debt loads.  This survey highlighted a few areas where further inquiry may be useful in assisting farmers facing obstacles to obtaining the financing they need.  

MassDevelopment has considerably experience with innovative financing tools and might be an appropriate entity to establish a new funding program to support agriculture and value-added producers.  Such a program exists in Pennsylvania, where farmers and organizations can get loans or loan guarantees for capital improvements, working capital, planning, or new initiatives.  

Community Supported Agriculture (CSA) is one strategy that some farmers use to increase cash flow.  In a CSA program, customers pay an up-front fee at the beginning of the season and receive a share of the farm’s production over the course of the growing season.  CSA programs provide farmers with more working capital at the beginning of the season.

The transition to higher-value or more environmentally sustainable products and methods (such as certified organic production, Integrated Pest Management (IPM), ethnic produce, etc.) can incur significant costs. The Department of Agricultural Resources has grant programs to support planning for such transitions, such as the Farm Viability Enhancement Program.  However, these grants are limited. DAR and the Commonwealth should expand financing programs (both training and capital costs) for farmers who want to transition to higher-value products and methods.

14.a    MassDevelopment should explore opportunities for a new agriculture-oriented funding program

14.b    Private investors should consider creating or investing in local agriculture financing programs  

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