Guide to Financing the Community Supported Farm

Project Overview

ONE11-146
Project Type: Partnership
Funds awarded in 2011: $14,982.00
Projected End Date: 12/31/2012
Region: Northeast
State: Vermont
Project Leader:
Mark Cannella
University of Vermont Extension
Co-Leaders:
Allen Matthews
Chatham University

Annual Reports

Information Products

Commodities

Not commodity specific

Practices

  • Education and Training: decision support system, extension, mentoring
  • Farm Business Management: whole farm planning, new enterprise development, agricultural finance

    Proposal abstract:

    Small and beginning farmers engaged in sustainable agriculture in the Northeast often don’t have business models that allow immediate cash loan repayment required by traditional debt financing. Increasing numbers of these farmers are hence exploring financing alternatives by reaching out to customers and community members to finance infrastructure improvements, equipment purchase, soil and water quality enhancement, farmland preservation or other community oriented benefits.

    Alternative or “community” financing, however, can have serious legal implications. Limited resource small and beginning farmers lacking access to legal services are unaware of the legal considerations and strategies to reduce liability risk. Farmers generally don’t have the time or the capacity to conduct thorough research on how to best utilize innovative financing mechanisms.

    We have put together a team of six farmers, five attorneys, five agricultural service providers, and two financial experts to produce a 30-page guide that will help farmers in the Northeast identify practical financing alternatives. We are partnering with innovative farmers who have already implemented or explored “community financing” to make their operations more sustainable. Our goal is to expand upon these farmers’ knowledge and experience by conducting research and investigation into which legal and financial mechanisms have the most potential to improve a farm’s bottom line, its natural resource base, and surrounding communities. We will detail how these mechanisms can be used legally and effectively. All legal research findings and case studies will be peer-reviewed and summarized in a guide that farmers will find informative, easy to understand, and interesting to read.

    Guide to Financing the Community Supported Farm
    Purpose:
    –To provide relevant information for small (grossing less than 250k/yr) and beginning farmers (those with more than 3 years of operating experiences or towards later stages in start-up) who want to explore alternative financing or reach out directly to community members for purposes of financing farm operations.
    –To familiarize both farmers and potential capital partners with the legal tools that can be used to secure financing for the Community Supported Farm

    Once the guide is posted online for free download, we will invite farmers, community members, agricultural service providers, and other interested parties to download the chapters of the guide.

    Project objectives from proposal:

    The targeted project beneficiaries will be the project’s farmer partners and other farmers in the Northeast who are similarly exploring ways to finance sustainable agriculture supported by their communities. The guide may be useful to non-farming community members as well. However, our primary objective is to serve farmers because there is generally a greater need for legal outreach and education for them. Farmers generally work much longer hours than the average non-farming neighbor, and thus have less time to research complicated legal and financial issues on their own.

    Farmers also usually have less disposable income than the average community member, and are less able to afford legal services enabling them to utilize innovative financing mechanisms. These factors increase the risk of liability for farmers. Finally, farmers are most in tune with the true needs of farm operations and what benefits they can realistically provide the community.

    In conclusion, equipping farmers first with financial and legal knowledge is a logical starting point for enabling both farmers and community members to realize these benefits. We believe our strong focus on providing farmers with useful information is well aligned with the SARE Partnership Grant program’s objectives.

    Our research questions:

    1.What innovative financial or legal strategies can be used to improve a farm’s bottom line, its natural resource base, and its surrounding communities?

    2.What are the advantages and challenges of using each strategy?

    3.How can farmers use these strategies to legally and effectively finance their community supported farm?

    As outlined below, we’ve already identified five key innovations that hold promise for farmers to capitalize their community supported farms. These mechanisms still need further investigation to confirm their usefulness and determine how they can best be employed. If we find through our research that variations or different models are more suitable for farmers, then we will include them in the finished guide.

    For each pertinent model, we will include guidelines on how to put them into practice and information about the important legal considerations surrounding them.

    To assure relevancy of the guide’s contents, we will be maintaining close contact with our farmer authors and farmers on our review team. They will have key insight as to what elements of our research are most useful, and hence the most important to summarize in the final guide. Aside from our in-person meetings and phone calls with our farmer partners, we will establish an email discussion group that will be used throughout the project for this purpose.

    Guide outline:

    The format for the proposed Guide to Financing the Community Supported Farm is as follows:
    I. Introduction.
    How various financing mechanisms can help small and beginning farmers in the Northeast move towards sustainable agriculture.
    What is the “Community Supported Farm”?
    Review of the terms “profit” and “Return on Investment” through a sustainability lens.

    II. Legal considerations pertaining to community financing:
    1.) Federal Securities Laws
    2.) State Securities Laws. Vermont as an example. Does VT differ from other states in the Northeast?
    3.) Securities registration exemptions. Which are most applicable to the small farm and communities that support small farms?

    III. Legal mechanisms that make the CSF possible:
    1.) The Community Land Trust model and Ground Leases
    2.) “preferred CSA shares”
    3.) LLPs, LLCs, L3Cs, Cooperatives
    4.) Royalty financing (vs. Equity financing)
    5.) Promissory notes

    IV. Farmer Case Studies

    V. Model legal documents or samples
    1.) Promissory note sample
    2.) Hybrid promissory note/bill of sale
    3.) Example of a "farm prospectus”
    4.) Royalty financing contract sample

    VI. Glossary and References

    Assignment of tasks:
    Our project team is made up of seven farmers, five attorneys, five agricultural service providers, and two financial experts. Each member of the guide production team has been assigned to author portions of the guide according to his or her background or expertise. Authors will conduct detailed research and investigation on his or her assigned topic(s) and summarize findings in prose that farmers will find easy to understand and interesting to read. Once all contributions are compiled in draft form, another panel of experts making up the “review team” will join the authors to each review the draft guide for accuracy, grammatical correctness, and readability.

    The complete team and division of tasks are as follows:
    NAME AFFILIATION TASKS
    Allen Matthews UVM Center for Sustainable Ag. Principal Investigator
    Ben Waterman UVM Center for Sustainable Ag. Coord,Ch.I,Ch III.1
    Erin Roche UVM Center for Rural Studies Ch III.3.
    Kenneth Miller, esq. Law for Food Ch II, Ch III.5, and Ch V
    James Macon Small Business Consultant Ch III.2
    Kristina Michelsen, esq. Attorney at Law Ch III.4
    Emily Curtis Murphy, farmer Fair Food Farm Ch IV, farm case study
    Walter Jefferies, farmer Sugar Mountain Farm ChIV casestudy
    Corie Pierce, farmer Bread and Butter Farm Ch IV, farm case study
    Matt Burke, farmer Bloomfield Farm Ch IV, farm case study
    Keith Morris, farmer Prospect Rock Permaculture Farm Review team
    Rachel Schattman, farmer Bella Farm Review team
    Chris Chaisson, farmer Wild Branch Botanicals Review team
    Mary Peabody UVM Extension Review team
    Annette Higby, esq. Attorney at Law Review team
    Ken Merritt, esq. Merritt, Merritt, Moulton Review team
    Anthony Iarrapino, esq. Conservation Law Foundation Review team
    Mark Canella The Intervale Center Review team
    Janice St. Onge VT Sust. Jobs Fund Review team

    Timeline summary:
    April 2011: Initiate project, meet with author team, and confirm work plan and goals
    May 2011-November 2011: Compile resources and information, draft due of each guide section by December 1.
    December 2011: Review team conducts guide contents review. Input submitted to coordinator.
    January 2012: Copy edits and guide is finalized by January 15, 2012.
    January 2012-March 2012: Publicity and outreach campaign.

    Publicity campaign:

    Our publicity campaign will be geared towards inviting people to access the finished guide chapters online a pdfs for free downloading at any time. The guide will be available online at:

    UVM Extension New Farmer Project website:
    http://www.uvm.edu/newfarmer
    UVM Center for Sustainable Agriculture’s Farm Enterprise Program website:
    http://www.uvm.edu/sustainableagriculture/?Page=enterprise.html=
    Law for Food’s website:
    http://www.lawforfood.com

    Once the guide is posted online for free download, we will invite farmers, community members, agricultural service providers, and other interested parties to download the chapters of the guide. We will send invitations to 5 different email list serves in the Northeast (UVM newfarmernet, Vermont Pasture Network, UVM Extension, Vermont Vegetable and Berry Growers Association, and the Northeast Beginning Farmer Learning Network), and will request that our email announcements be forwarded widely. We will send press releases to all of the Northeast’s major newspapers. UVM Extension has dedicated publicity staff who craft and deliver press releases in a manner that optimizes response from the press. According to their experience, the press responds enthusiastically to unique developments, and we’re confident that there will be significant interest in the guide because of its innovative nature.

    We will also draft small articles explaining why the guide was created, who it is intended to serve, and how it can be used. These articles will be submitted to organizations we partner with throughout Vermont and the Northeast. They will be encouraged to run the articles in their newsletters. We will also run them in our quarterly newsletters, such as UVM Center for Sustainable Agriculture’s “Cultivating Connections.” We will customize the articles for agricultural newspapers, such as “Agriview,” that are usually on the prowl for newsworthy agricultural developments. Finally, we will post the articles about the guide on our online blogs:

    UVM Extension New Farmer Project blog:
    http://newfarmerproject.wordpress.com/
    Law For Food blog:
    http://www.lawforfood.com/Law_for_Food/Blog/Blog.html
    Sugar Mountain Farm’s blog:
    http://flashweb.com/

    Outreach Efforts:

    Our effort to disseminate our research results will continue well beyond two months. We will make clear in our newsletters, websites, blog articles, emails, agricultural presentations and other personal correspondences that we will be available, where appropriate, to conduct workshops, seminars, and other events to facilitate learning for farmers about the guide’s topics. Our attorneys will be available to offer legal services to farmers when needed. Having gone through the research and review process involved in producing the guide, the attorneys will be well equipped to provide efficient assistance.

    We will have a limited number of printed copies of the guide available as samples for trade shows, conferences or workshops. We will print 200 copies for this purpose, and we will include mention during our publicity campaign that these samples will be available to agricultural service providers throughout the Northeast using the guide as reference for their workshop topics.

    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.