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Financing Barriers for Small, Sustainable Farmers

Self-Help, one of the nation’s largest community development lenders (, announced the release of a research report on financing barriers for small, sustainable farmers, “Funding the New Harvest.”

It is no secret that across the country demand for organic and local foods is accelerating and entrepreneurial farmers are responding to this demand. Further, this phenomenon has the potential to aid in the revitalization of rural areas and provide benefits to urban consumers.

Over the last two years, Self-Help has been exploring this question: are lenders adequately assisting these farms to grow? Focusing on North Carolina, our report documents problems and recommends changes in the financing infrastructure to better serve this new breed of sustainable farming enterprise.

Below is the report’s Executive Summary.

Executive Summary

What are the barriers to appropriate credit for the growing sustainable farming movement in North Carolina and how can these barriers be overcome? This study uses a literature survey, expert interviews and a survey of 400 sustainable farmers. The target population is the group of N.C. farms and related businesses that a) are small-scale, b) use ecological farm practices like organic, c) produce for local markets and/or d) produce specialty items. This study is not focused specifically on certified organic or any one production system. “Small” is defined as less than 50 acres.


– Small, sustainable farm enterprises are multiplying in N.C., reflecting growth both in demand for their products and infrastructure to deliver them. North Carolina has 25,000 farms of less than 50 acres. There are 80 to 100 certified organic farms in N.C. and many more that actively employ sustainable methods, particularly in and near the Triangle, Asheville and Boone. Farmers markets, subscription sales and other direct sales are growing.

– Private lenders, government lending agencies and their regulators are too often confused as to whether sustainable farm enterprises are farms, hobbies or non-farm specialty businesses. This has occurred as farmers have become more entrepreneurial to reach specialty markets, while more and more non-farm small businesses have entered the farm/food arena seeking markets.

– The size, production methods and/or product offerings of these enterprises may disqualify them for or hinder their access to government farm loan programs. Farm loan programs have evolved to better serve commodity agriculture, not entrepreneurial farmers or non-farm specialty businesses that have some connection to agriculture.

– The farm-like qualities of these enterprises may disqualify them for or hinder their access to government small business loan programs. While the Small Business Administration and related programs typically do not forbid access by farm-related businesses, these programs are generally not prepared to serve hybrid businesses that blend agricultural and entrepreneurial activity.

– Many sustainable farms are start-ups and as a result may have difficulty qualifying for government farm or small business loan programs. Requirements that a farm or business have three to five years of operating history shuts out promising new entrepreneurs.

– The debt aversion of sustainable farm entrepreneurs, borne of years of watching painful farm foreclosures, may hinder practical use of debt to grow the industry. While farm families can be understandably reluctant to mortgage farm property, real estate collateral is commonly and effectively used by many non-farm entrepreneurs. In addition, debt for other needs such as equipment may be underutilized due to lack of comfort with the lending process or lack of knowledge of loan programs and products.

– The farmers we surveyed expressed little knowledge of USDA Farm Service Agency programs, a primary federal source of assistance to farms.

– Sustainable farm enterprises have small-scale capital needs, indicating an opportunity to explore micro-credit programs. Two-thirds of farmers surveyed who expressed a need for loans desired less than $50,000. The funding needs of sustainable farms are diverse and include equipment, buildings, land, marketing and R&D.

– Overall capital demand for these enterprises represents a substantial potential market for lenders. Since these operations expect to match debt to equity 50-50, if each of North Carolina’s 25,000 small farms borrowed the median amount from our survey ($16,500) demand would top $200 million. Demand from the 400 sustainable farms surveyed would top $3 million.

– Sustainable farm enterprises believe that cash flow and weak markets are major hurdles to financing, and not that lenders are biased against them, organic or their lifestyle choices.


  1. The lending community should facilitate farm entrepreneur access to outside training and technical assistance regarding capitalization and business plan development. Lenders can learn about, network with and support these technical assistance providers.
  2. A third party institution should oversee data collection on specialty and organic crop production and prices so that farmers and lenders can use them in business planning and underwriting. The NC Department of Agriculture currently does this for conventional farmers.
  3. Lenders should actively support efforts to improve the infrastructure needed to bring niche and organic products to market. For example, lenders could provide financing and other support to community farmers’ markets, farmer cooperatives and retailers selling organic/local produce.
  4. Financial institutions should undertake efforts to become better educated about sustainable agriculture and the resulting business opportunities. Lenders will need to monitor the rapid pace of developments in this business sector. Self-Help has developed materials that outline how financial institutions can better underwrite to this sector and will share those materials with the financial sector.
  5. The USDA Farm Service Agency, Farm Credit System institutions, the U.S. Small Business Administration and other lenders should investigate ways they might improve marketing of their programs and products to sustainable farmers, encourage entrepreneurial farming through collaboration and training, and reform underwriting and program rules to increase access to credit by sustainable farmers.
  6. Federal/state government officials, community development financial institutions (CDFIs) and other interested funders should investigate incentives such as dedicated loan capital and/or credit enhancements. CDFIs should explore the opportunity to be a new conduit for small farm finance to the extent that this fits their historic mission of rural development, new enterprise development and bridging credit gaps.

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© 2015 The Weston A. Price Foundation for Wise Traditions in Food, Farming, and the Healing Arts.