Incubation, expansion and learning: The microloan fund for New England farmers
The Carrot Project is working to address farm-financing gaps, and to provide case studies that detail how to fill financing gaps, with varying degrees of both involvement from lenders and availability of business technical assistance. Working with Strolling of the Heifers, we’ve set up a microloan program with two different lenders in two states, Vermont and Massachusetts, and are in the final stages of setting up a second loan program (with a third lender) in Maine. The lenders comprise a regional bank, an economic development agency, and a community development finance agency. Six microloans, totaling $54,180, have been made to farmers in Massachusetts and Vermont; 13 farms are prequalified for the current microloan application round; and two applicants are prequalified for the next round of financing. The Loan Review Committee members include two farmers — a beginning farmer and a farmer with more than 25 years of experience. The new Maine loan fund is scheduled to open to applicants this spring. The final case studies will discuss: the process of setting up, and then working with, the different types of lenders, and how those arrangements affect farmer applications and criteria; the role of The Carrot Project; provision of technical assistance; and ways to set up investment pools using the existing systems and vehicles available at each institution.
The results for incubating the microloan fund for New England Farmers will include:
1) Approximately 27 loans (if median loan amount is $5,000) to farmers unable to access financing through more conventional means. We’ve made six loans, averaging $9,030.
Because of the size of the loans and the time it took to complete contracts for the new regions — the process ending in February 2010 instead of November 2009 — it is unlikely that we will make 27 loans by November 2010.
2) Refinement of the process to improve subsequent rounds of financing.
We’ve completed an evaluation of our first round of financing and, as a result, have modified our outreach efforts and increased the maximum loan amount by $5,000 to $15,000. It is likely that we will refine loan evaluation criteria during the summer of 2010.
3) Connections to technical assistance for an estimated 12 farmers, with a cost-share available if needed.
We have not needed the cost-share to date, but have provided technical assistance to 7 applicants and referred 3 to other technical assistance providers.
4) Agreements for expansion of the program to two new regions.
We have just completed contracts to expand the microloan fund to all of Massachusetts, and have finalized a contract for the program in Maine. There, we are working with investors to secure the needed loan capital and hope to launch the program this spring.
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).
The partnership with the economic development agency could lead to a loan fund providing larger amounts of financing, assuming that the contract recently executed is successful. The Maine loan fund will provide loans of up to $35,000; other types of loan funds are also possible, if warranted.
6) Case studies to be used as educational tools for others interested in doing similar work.
We have not started to meet this performance target, but have all the elements in place to do so.
Milestone 1: Evaluation of 1st Quarter outreach and application process. The evaluation occurred last summer. We learned that: 1) Educational or informational workshops or information sessions held in coordination with other non-profits, or as part of an existing meeting, are more successful than stand-alone events, as might be expected; and 2) We learned that more-extensive outreach is needed in Massachusetts than in Vermont. The application process has worked very smoothly with the regional bank and with many of our applicants in Vermont, where extensive technical assistant services are available. The application round now underway in Massachusetts has required a more robust effort on our part to support the application process directly, both through our online resources and with referrals. If we are to use any of the technical assistance funds, it will likely be in Massachusetts. We will be testing the application process with the economic development agency this spring. The loan fund in Maine will use the community development finance institution (CDFI) standard loan application and process, and we do not anticipate any difficulties in that situation. We have not changed the application process, but anticipate evaluating the loan evaluation criteria this summer.
Milestone 2: Recalibration of outreach and loan process. See response to Milestone 1. We will know the results of our modified outreach program in Massachusetts later this year.
Milestone 3: Draft formal agreements with non-profit and lender partners to expand programs and recruit loan committee members for Maine and for Central and Eastern Massachusetts. This is complete but took longer than expected because we did not allow, in our work plan, sufficient time to build and maintain organizational partnerships, which is an important part of our mission.
Milestone 4: Draft case studies of lessons learned from three states and three situations. We have not yet started this work, but plan to start it in June after the first batch of loans have been closed in Massachusetts and Maine.
Milestone 5: Publicize case studies and issue Final Report. We have not yet started this work and will begin when the case studies are finalized this summer.
Impacts and Contributions/Outcomes
It is too early to describe or assess the impacts of this work with any confidence. We have just started follow-up interviews with farmers that received loans in 2009. It is also too soon to know whether the programs will become institutionalized at the respective lending institutions. The loan programs have led to multiple requests to be involved with, or help set up, similar programs in different parts of the country.
New England Bank
855 Enfield Street
Enfield, CT 06082
Office Phone: 8602534056
325 Hardscrabble Road
Briarcliff Manor, NY 10510
Office Phone: 9142614200
30Brick Hill Road
Newcastle, ME 04553
Office Phone: 2078826875