A 1992 federal law established a federal-state partnership loan program for new farmers and ranchers. Commonly known as the “aggie bond” program, it offers low interest loans from money bonded by participating states. In the Northeast, only Pennsylvania has such a program. The Growing New Farmers Project is working to encourage more states to participate in this program or others to provide financial assistance to beginning farmers.
Some community-based economic development organizations offer small business loans. For example, in Hampshire County (MA), the Valley Community Development
Corporation offers loans to small businesses, including agricultural businesses. Coastal Enterprises, Inc. in Maine, has a program devoted to agricultural lending and business development.
A survey of farmers in western Massachusetts several years ago revealed (or confirmed) that established, larger and more conventional farmers do not experience much difficulty in obtaining credit. But start-up and non-traditional farm businesses more often rely on “family, friends and others”, personal credit cards or line of credit from a home mortgage for loans. The New England Small Farm Institute experimented with a “peer lending” program for start-up micro-loans, in trying to fill the gap in small loans for start-up farm businesses. In fact, the Farm Credit Foundation, an arm of the FCS, recommends that a micro-loan program be developed, perhaps by the federal government, in response to this identified need. The Growing New Farmers Project is fostering the development of several community-based lending models. With the existing programs and some exciting new ones under development, diligent and prepared new farmers will find it possible to meet their credit needs.
While most farm businesses borrow money at some point for operating or to purchase land, equipment or livestock, debt is a slippery slope. Our entire agriculture is built on a model that encourages farmers to get deeper into debt by getting bigger — acquiring more and bigger equipment, more acreage, more inputs just to try to stay even. Farm entry models that minimize debt, such as renting instead of purchasing land right away, or using your own and family labor instead of fancy equipment and other inputs, should be encouraged. Smart planning will help you make the best decisions about the role of credit for your farm enterprise.