As state executive director for the USDA Farm Service Agency in California, I have met countless beginning farmers and ranchers, military veterans, farmers market vendors, CSA growers, urban agriculturalists and many others interested in making a living growing the food that we consume.
For most of these men and women, two significant issues stand in the way of their dreams: access to land and access to capital. To address these challenges, USDA has introduced a new solution in ag lending: the microloan.
Land is prohibitively expensive in California and the daily costs of running even a small farming operation can test the mettle of the most committed would-be farmer or rancher. Many have resorted to funding their daily operating expenses on a credit card or with a high-interest personal loan. The debt burden quickly becomes overwhelming, the personal risks too high and the result can be dashed hopes and deferred dreams, bankruptcy or worse.
In a state where the average farmer is approaching 60 years of age, we need programs like the microloan that address this “capital crunch” in a direct and citizen-friendly way.
Moreover, to revitalize our rural communities and economies, we need programs that invest in our people and provide the next generation of farmers and ranchers with the financial tools they’ll use to grow their own version of the American Dream. USDA understands these critical needs of smaller farmers and ranchers and our new microloan program that will provide up to $35,000 to help bolster these producers during their start-up years.
Microloans are like other operating loans offered by USDA. They can be used to purchase livestock, equipment, feed, seed, fertilizer and related supplies. But here’s a real benefit when compared to those who use credit cards and personal loans to fund their operations: The current interest rate for a microloan is 1.125 percent. From the tiniest acorns grow the mightiest oaks.
Here’s how microloans are different from traditional FSA loans. Applying for them is a simpler, more flexible process. By reducing the application form from 17 pages to seven and modifying requirements for experience, it‘s far more convenient for both our customers and our employees. We’ve also reduced the red tape and bureaucracy to make the whole process more citizen-friendly.
Of course, some farm production or apprenticeship experience is necessary, but there are many producers who may not meet the managerial requirements for traditional loans and still may be eligible for a microloan. FSA will consider an applicant’s small business experience, experience with an apprenticeship and specialized education to meet this prerequisite.
It is imperative that we use new tools like the USDA microloan to provide access to credit to those just starting out or those producing on a smaller scale in order to grow American agriculture. It’s important because agriculture can provide the food, fuel and new jobs that will build our economy and ensure a safe and affordable food supply at home and abroad.
It’s important because loans like these keep people living in vibrant, economically successful rural communities, sending their children to our local schools, and doing business with local shops, banks and other businesses. And it’s important because a rising tide lifts all boats.
As the country moves toward more local and regional food sources and cities and communities around the state join the growing “field-to-fork” movement, there are increasing numbers of people going back to the farm and selling their products directly to consumers through farmers markets and Community Supported Agriculture businesses. Microloans are perfect for these farmers and also those who grow niche crops to sell directly to ethnic markets, restaurants and specialty produce distributors.