Private, low-interest loans offered to small farms

Whole Foods Market is getting into the small-lending business. Image: Flickr / forever5yearsold / CC-BY-ND

For small food producers, finding financing can be tough. Small farms often have high costs and low profit margins, which makes getting loans difficult at best. Some private businesses, however, are getting into the farm-loan business.

Whole Foods Market offering $4 million

In 2007, Whole Foods Market started the Local Producer Loan Program. This program provides small loans to small food producers. The loans range from $1,000 to $100,000 and have interest rates of 5 percent to 9 percent. These bad credit personal loans, not payday loans, are intended to help local food producers expand capacity or improve production. In the past, these loans have been used to convert farms to organic production or increase availability of their products; at least partially to be sold at Whole Foods Market.

Microlending clubs targeting local food

Microfinancing and microlending are usually buzzwords used while talking about financing growth in developing nations. In some areas of the country, new microlending clubs are targeting local-food producers, offering loans of less than $100,000 and working with farmers to create repayment terms that the farmers can easily handle. For some farmers, this means quick no credit check payday loans financed by small groups of people that believe in what the farmers are offering. For others, it means extended loan obligations. Every lending club is different, and most are goal-driven.

The challenges of funding small farms

Small farms, organic food, farmers’ markets and slow food are gaining popularity, but financing them is still a gamble. Seasonal crops that are sensitive to weather changes combined with small markets makes it a tough industry. Add to this the fact that many new FDA regulations require increased testing and production methods that are simply more expensive, and many small farms are looking for ways to pay for this increased testing. In general, farms receive about 10 cents from every food dollar spent– and more than half of people making their livings off farming have less than $100,000 a year in gross sales. This means that, on average, a small farm can count on $10,000 a year or less of income. In short, small farms face a tough time when it comes to balancing the books — and every food dollar the American public spends adds up to a vote for the kind of food producers who survive.