Incubation, expansion and learning: The microloan fund for New England farmers

Final Report for CNE09-066

Project Type: Sustainable Community Innovation
Funds awarded in 2009: $17,514.00
Projected End Date: 12/31/2009
Region: Northeast
State: Vermont
Project Leader:
Julia Grigg
The Carrot Project
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Project Information


The Carrot Project set up a microloan program with Strolling of the Heifers in two states, Vermont and Massachusetts, and have set up a third loan program in Maine. The lenders comprise a regional bank, an economic development agency, and a community development finance agency. Fifteen microloans, with an average size of $12,300 and totaling $184,650, have been made to farmers in those three states. These loans are the result of more than 100 farmers contacting us about the program, and more than 30 beginning the application process. The Loan Review Committee members include two farmers — a beginning farmer and a farmer with more than 25 years of experience — as well as agricultural lenders and others community members. The final case studies or report, titled Setting Up Farmer Microloans in Three States, describes how program set-up and operation differ, based on the type of lender available, the capital needs of that lender, and the availability of farmer technical assistance, which allows farmers to understand and communicate the implications of their business and financial decisions.

Project Objectives:

The following outlines our six objectives, describes project results, and notes whether or not the objective was met by the end of the grant period.

(1) Approximately 27 loans (if median loan amount is $5,000) to farmers unable to access financing through more-conventional means.

We’ve made 15 loans, averaging $12,300. Because establishing lender agreements took longer than we’d anticipated, we began the loan programs in Massachusetts and Maine at the end of March 2010 instead of January 2010. Given that most of our loan activity occurs between February and April, this change had a negative impact on loan volume. In addition, Massachusetts applicants are taking longer to complete the application process because of their relative lack of readiness to apply for loans — they often interrupt the process to take a business-planning course or to work alone (or with a consultant) to prepare their business information. The most significant amount of work being completed is on their financials. In Maine, we did not have enough time after the lender agreements were complete to execute a full outreach and publicity program. The winter of 2011 is our first real test of these efforts.

(2) Refinement of the application process to improve subsequent rounds of financing.

As the result of an evaluation of our first round of financing, we increased the maximum loan amount by $5,000 to $15,000. In 2011, the maximum loan amount will increase again to $35,000 in Vermont and Massachusetts (matching that in Maine). This increase responds to applicants’ needs; they frequently seek additional sources of capital — usually no more than $15,000, which reflects the need indicated in our original research. In addition: loan eligibility is being extended to midsized farms in all three states; we have added to our technical assistance capacity in Massachusetts and are seeking to bolster this further; and we have added farmer conferences and meetings to our outreach efforts.

(3) Connections to technical assistance for an estimated 12 farmers, with a cost-share available if needed.

The farmers have not participated in the cost-share, but we have provided technical assistance to eight applicants and referred four to other technical assistance providers. We may have needed the cost-share, but we paid for a greater portion of technical assistance for applicants because it allowed us to prepare and test sample and template application materials. These new materials will be posted on our website as a resource for future applicants. A significant portion of applicants (25%) either has participated in, or is participating in, a formal program such as a farm viability program or coursework that culminates in production of a business plan.

(4) Agreements for expansion of the program to two new regions.

We have expanded the program to two new areas and are now offering microloans in Maine and Massachusetts, in cooperation with Coastal Enterprises, Inc. (CEI) and MassDevelopment, respectively.

(5) Establishment of partnerships and processes that can be utilized for a second fund, which will make larger amounts of financing available (median loan amount of $30,000).

We are in the early stages of launching a new program called the Greater Berkshire Sustainable Agriculture Fund. This fund will likely provide loans in the range of $15,000–$75,000, with a median of $30,000. We have raised a majority of the operating support for the program’s first year and a portion of that for the second year; have early commitments from investors for capital of $300,000 (our working goal is $500,000); are hiring a staff person to coordinate the program; have begun discussions with potential lending partners;are evaluating options to ensure sufficient technical assistance is available; and investigating ways to integrate our work into on-going economic development activities.

(6) Case studies to be used as educational tools for others interested in doing similar work.

The case studies will be delivered in a report with the working title, Setting Up Farmer Microloans in Three States. It is near completion and is being sent to our partners for their review and feedback. We expect the case studies to be available in March 2011, with corresponding outreach in April and May 2011.


As communities and regions, we face the challenges of keeping farmers in farming, and shaping a food system that works for farmers and consumers while bolstering local and regional economies. As established farmers in the Northeast age, entry-level farmers are needed to replace them. There is also growing demand for locally and sustainably grown foods, and farm enterprises need to expand to meet this demand. Given these two factors, it is concerning that 25% of farmers requesting financing are denied access to credit. More compelling is the fact that start-up and expanding businesses make up a majority of farms denied credit, and these are the farms on whose success we will increasingly depend.

The Carrot Project’s 2008 survey of 706 farmers in New York and New England (completed prior to the tightening of credit markets and supported by a 2007 Sustainable Community Grant) showed that 25% of small and midsized farmers applying for operating or capital loans are unsuccessful. This is especially true for start-up and expanding businesses. This problem has been recognized by agricultural professionals. Jon Jaffe of Farm Credit East, ACA, and a member of The Carrot Project Advisory Board, states, “Farmers who lack equity need first- or second-position liens to provide adequate collateral to receive financing.”

Farmers are being denied financing because of inadequate credit history, collateral, or cash flow. Lenders are unable to work with some farmers because of the costs of administering smaller loans, lack of flexibility in applying selection criteria (such as allowing for alternative collateral or limited credit history), and inflexible terms. Community development finance institutions (CDFIs) finance many small businesses. However, they were pioneered to address urban issues and typically have little or no agricultural expertise. Though agricultural lenders such as Farm Credit and the USDA Farm Services Agency — known as the lender of last opportunity — do offer credit, neither adequately serves farm operators perceived as greater risks because they are in the start-up stage, have “alternative” enterprises, or are poorly collateralized. Use of business technical assistance combined with new sources of capital and alternative financing, such as flexible payment options and ability to work with farmers with inadequate credit history or collateral, can start to address this situation.

This project is important because it has helped to address farm-financing gaps and provide case studies detailing how to fill those gaps, with varying degrees of both involvement from lenders and availability of business technical assistance. We provided 15 microloans with a median loan size of $12,300, in collaboration with lenders that have limited agricultural portfolios, particularly for small and midsized farms; matched or provided farmers with business planning technical assistance; and built the partnerships and track record necessary to expand the microloan program and provide the basis for a new financing program, whose median loan size is estimated to be $30,000.


Click linked name(s) to expand/collapse or show everyone's info
  • Denise Dukette
  • Jon Jaffe
  • Stephen Kim
  • Orly Munzing
  • Benneth Phelps
  • Morgan Rilling-Greenwood
  • Lee Straw


Materials and methods:

Dorothy Suput, Founder and Executive Director of The Carrot Project, played a facilitative and integrative role throughout the process. In addition, she took the lead on farmer outreach, establishing partnerships for expansion of the program, and drafting the case studies. Orly Munzing, Strolling of the Heifers (SOTH), carried out general publicity and was involved with program management. The Strolling of the Heifer Loan Program Committee oversaw implementation; members included Dorothy Suput; Arne Hammarlund, People’s United Bank (formerly Chittenden Bank); Orly Munzing; Susan McMahon (the Windham Regional Commission and board member of The Carrot Project); and Martin Langeveld (SOTH).

The Loan Review Committee included: Denise Dukette, Western Massachusetts Enterprise Fund and then New England Bank; Jon Jaffe, Farm Credit East, ACA (formerly First Pioneer Farm Credit ACA); Lee Straw of Straw’s Farm; Morgan Greenwood-Rilling, Yankee Farm Credit ACA; Stephen Kim, investment analyst; and Benneth Phelps, Mosaic Farm (formerly of Enterprise Farm). Both Denise and Stephen joined in the middle of the grant period. The following individuals stepped off the Loan Review Committee in 2010: Rick Chandler, Massachusetts Department of Agricultural Resources; Poppy Davis, USDA-RMA (now the Ecological Farming Association); and Helen Robb, Robb Farm.

The following activities were components of our methodology. Following each one is a description of how relevant tasks were carried out and their success.

(1) Evaluation of 1st Quarter outreach and application process:

The Carrot Project developed survey questions for farmers that had participated in the application process, Loan Review Committee members, and the Program Oversight Committee. The survey was generally carried out by phone, and in some cases, by email. Overall, this method worked very well. As a result of carrying out the 1st Quarter evaluation, we refined our questions for farmers so that, for example, different questions were asked of farmers that started, but did not finish, the application process, than were asked of those that received a loan. To secure the most informative responses from farmers with whom we have only brief contact, it is important for the evaluation to occur as soon as possible. The evaluation by the Loan Review and Program Oversight committees worked best when members had an opportunity to evaluate the work as a group and build on one another’s comments. However, we also provided an opportunity for Loan Review Committee members to respond individually, so as to capture the broadest range of response. Allowing for two channels for committee member response was valuable.

(2) Recalibration of outreach and loan process, as necessary:

As a result of the evaluation process, we made changes to outreach efforts and to the loan application process. This allowed us to respond to the needs of farmers and to secure input from those involved in conducting the program. We found that tracking the following information is helpful in evaluating our work and determining what activities are most effective: the types of farmer outreach and the approximate number of farmers contacted; the number of inquiries about the program; the number of referrals to technical assistance, as well as which types and outcomes; numbers of pre-applications and full applications submitted; number of applications reviewed by the Loan Review Committee; number of site visits; and number of loans closed.

(3) Draft formal agreements with non-profit and lending partners to expand programs, and recruit Loan Review Committee members for Maine, and for Central and Eastern Massachusetts:

The negotiations and drafting of agreements with lenders were carried out through a combination of in-person and phone meetings, supported by frequent email communications. It was important for both the Massachusetts and Maine processes to allow plenty of time for subsequent drafts of agreements, because new thinking came to light after most conversations. It took about 10 months from initial contact until we had signed agreements.

We did not recruit Loan Review Committee members for Maine because our lending partner has the capacity to evaluate loan applications. In Massachusetts, we recruited new committee members by phone. It was very helpful to have a job description and schedule of activity for the prospective members to consider so they could understand the expectations of participating.

(4) Draft case studies of lessons learned from three states and three situations:

The primary author of the case studies is The Carrot Project, with review provided by the partnering organizations.

Research results and discussion:

The impact of the project on farm viability was positive and is likely to be greater over time. We also learned that it is difficult to track certain types of information that are important to understand the program’s full impacts on farm viability and sustainability.

The positive individual feedback we received can be summarized in the quotes below:

“With the microloan I received, my vision for my farm is moving forward. It involves building a micro dairy plant to bottle my own milk and produce dairy products on the farm.” — Kyle Bostrom of Bostrom Farm, a 2009 microloan recipient

“The Carrot Project is helping me advance towards my goal of expanding my business and ultimately purchasing my own farm.” — Jon Cohen of Deep Meadow Farm, a 2009 microloan recipient

To start to understand our program’s impact on farm viability, we planned on collecting a variety of information. We learned that some of what we hoped to collect was nearly impossible to gather because of our application process, other information would have meaning only over a time period longer than the grant period, and there was no ready way to track the information we needed and have confidence in the collected data.

On the basis of the following information we collected, we are pleased with the process and the information gathered, and have identified small changes that will make this information more readily available and usable:

  • use of loans
    number of employees
    expected increase in profits
    farm success in meeting the goals of the loan to improve or maintain the viability of the farm

The planned and final uses of a loan are easily tracked in the farmer follow-up interviews. About twice as many farmers seek loans for capital expenditures as seek them for operations. It takes at least a season (or more) and an analysis of financials to begin to understand whether the use of a loan had the intended effect on a farm’s viability.

Loan recipient farms for which a full season has passed since the loan was made (we check in with applicants six months and one year after the loan closes, and again after the loan is repaid) have seen an increase in financial viability. The increases have been positive, but range widely from a few percent to more than 25%. Some changes will take longer than a season to be fully realized; results we’ve seen after one year have been good; the farmers project that they’ll be even better in subsequent years. Collecting this kind of information for individual farms will be easier as we begin to require yearly financials from applicants as a condition of making loans. In addition, three loans made prior to this grant period were paid off; these farms’ experiences will provide our first opportunity to look at profitability for a period greater than one year.

Actual increases in profitability are difficult to compare accurately across farms because we do not request standardized submission information. This practice makes the application process easier for the applicant, but does not allow us to compare change in profitability across farms because each farm includes different information in its financial statements. In addition, measuring change in profits does not fully convey the changes on farms. This is especially so when the loan recipients include, on the one hand, farms that are tweaking their operations for efficiencies and expecting small positive changes, and on the other, those that expect to operate at a deficit in their first year or two and then significantly increase their revenue stream and profits. However, once farms become profitable, most applicants expected an increase of 10–20% per year. This was generally borne out for applicants for whom we have information for a year or longer.

There was little change in numbers of employees as a result of the loans that were made. In general, increases were more likely than decreases, but in most cases, the number of employees did not change. To a lesser degree than with profitability, comparing this information between farms was difficult because of a lack of standardized treatment. Farmers hire part-time and seasonal workers as well as regular employees. How these are treated on Schedule F and how they are reported in a business plan can be very different between farms. We can address this difficulty by standardizing how we treat information, and then comparing it over time.

The most difficult factor for us to track was a farm’s “continued or increased contributions to a clean environment and improved farm stewardship.” Significant work is needed to determine what information would measure such contributions, and how best to track this information. Our research showed a huge gulf between theoretical or academic options and systems available for practical implementation. One possibility would be the use of third-party certifications or management plans.

In addition to the positive impacts on the farmers with whom we work, we have received regular inquiries from others trying to address similar issues in their regions. Though until recently we didn’t track the number of interviews and questions we field about our work, since the fall of 2010 we have discussed our work at length — in person, by phone, and via a webinar — with or for at least eight different organizations (not including webinar participants).

Participation Summary

Education & Outreach Activities and Participation Summary

Participation Summary:

Education/outreach description:

Outside publicity about our loan programs centered on farmers and technical service providers. The primary educational effort of this project comprises the case studies in the report, Setting Up Farmer Microloans in Three States. This report will be publicized in the following ways in the spring of 2011.

  • submit articles to two or three relevant farm and finance publications
    announce the report’s availability through The Carrot Project’s “900 and growing” email list
    participate in relevant conferences, workshops, and presentations: for example, we will use portions of this work in material for an implementation handbook and two trainings for community development finance institutions in 2012 (as a subcontractor to the Opportunity Finance Network award from the CDFI Funds Healthy Food Options Initiative)
    hold a conference call or webinar in spring 2011 for interested parties to learn about the case study results
    publish the report at
    send news releases to all The Carrot Project funders

Project Outcomes

Project outcomes:

The following describes how the results of this project have served the community and begun to affect the state of agriculture in New England and beyond.

One goal of the project was to join together community-based lenders, investors, non-profits, and farmers to create alternative financing programs while connecting farmers to appropriate technical assistance. We have accomplished this in two additional states with the start of the Maine Farm Business Loan Fund and the MassDevelopment/Strolling of the Heifers Small Farm Loan Program. We have utilized existing technical assistance networks in Maine and Vermont. In Massachusetts, we are working to strengthen our capacity to provide technical assistance and seeking ways to strengthen the availability of business and financial planning technical assistance across the state.

A second goal of the project was to act as an incubator to work through the difficulties inherent in any new program. This is occurring. We have shared the lessons we’ve learned from setting up and operating these loan programs with eight organizations in the last four months — and many others before we started keeping track. In one instance, this has led to the launch of a new program. For the past year, we have had contact with the Selma Café in Michigan as they develop the Farmer Fund in partnership with a lender in their region to provide loans for hoop houses. We are also contributing to an implementation handbook and training program for community development finance institutions interested in making farm loans (see response to #8 below).

A third goal of the program was to provide a new stream of capital for microloans geared toward small and midsized farmers using sustainable practices. As a result of the two new loan programs, we are making an additional $320,000 in capital available to small farmers. Our work with investors is starting to inform other projects, as well. The Michigan hoop house project described above is working with local investors. In addition, organizations such as Slow Money are looking to build a fund, the Soil Trust, to provide guarantees — what we do in two of our loan programs — which would be accessible to organizations across the country.

The one accomplishment we cannot confidently say we have made as a result of this grant is to advance our goal of institutional change — lenders operating, in ways they have not previously done, to support small and midsized sustainable farming. The exception would be CEI, which made a commitment, separate from our partnership, to re-emphasize their work in the field. Our partnership is an opportunity for CEI to act on that commitment. The work with the C.S. Mott Center for Sustainable Agriculture and CEI, plus other CDFIs, in the Opportunity Finance Network, is beginning to provide the basis for more CDFI lenders to enter the field. In addition, we hope that as we build a five-year track record, have the data to show that these loans are viable, and understand the associated costs, the lenders with whom we working, or others, will play a bigger role.

Assessment of Project Approach and Areas of Further Study:

Potential Contributions

As mentioned in several of the responses above, our work can be replicated or be used, in part, as a model. The purpose of the case studies is to help others understand how to do just that.

Future Recommendations

Additional work would be helpful to understand better the contributions that technical assistance and financing, both separately and together, make to the economic viability of smaller farms. We need to start addressing questions such as, when is an investment a good decision — based not on whether a farm can pay back a loan, but on the long-term financial viability of a farm’s particular situation and assets, and what it provides to a community and its owners over the life of the business.

Information Products

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.