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Microloans Come Home

June 4, 2012 - Yes, it's June already.  Time passes quickly, and that brings me to an important question: what are you doing to prepare yourself for the coming changes?  Are you growing a garden this summer?  Have you purchased a vehicle that gets higher gas mileage?  How much of your outdoor water comes from rain barrels?  Hope you're learning to go easy on the air conditioning.  Make sure you've got fans available.  Stocking up on your basic food requirements?  Candles?  Soap?  Baking soda and vinegar?  Most important of all, have you talked to your kids about what lies ahead?  Let them know their future will require lots of planning - and lots of courage.

You can use as your model the United States Department of Agriculture.  It appears they've been keeping their ear to the ground, because they've come up with a financial tool that's perfectly suited to the times in which we live.  Swarms of young people are demonstrating a readiness to take on the hardships and rewards of the farming life, but haven't the savings necessary to launch their careers.  Tom Vilsack, Secretary of Agriculture, is showing a level of awareness I don't generally associate with our federal government.  "As we expand options in agriculture, we're seeing a new vibrancy across the countryside," Vilsack observes. "Younger people, many of whom are now involved in local and regional production, pursue livelihoods while raising food for local consumption."  Their need for capital has given rise to the USDA's new microloans.

Traditional lenders typically have no interest in very small farming operations, even though they would appear to be the wave of the future.  Specialty crops and organic farming require less land, but may still warrant expenditures on such things as hoop houses (to extend the growing season), various kinds of tools, irrigation systems, and delivery vehicles, not to mention annual expenses such as seed, fertilizer, utilities, land rents, marketing, and distribution expenses.  The Farm Services Agency (FSA), one small part of the USDA, recognized the need for someone to step in with aid for these small growers.  Microloans have proved suitable for these entrepreneurs' specialized needs.

Capped at $35,000, microloans cannot be used to acquire farmland.  However, because the amounts of money involved are small, the application process has been streamlined.  Proof of farming ability and knowledge can now be satisfied with experience and organizational membership (i.e., Future Farmers of America), as opposed to the completion of a college degree.  The processing time for such small loans is greatly reduced, compared with the time required for a conventional Operating Loan, which may be for as much as $300,000.  For the farmer who is just beginning his or her career, cash flow can make or break them.  The benefits of a microloan are most pronounced during the start-up years, as the budding agriculturist builds capacity, increases equity, expands their use of FSA's loan programs, and eventually graduates to commercial credit.

Another incredibly important benefit is the provision of credit counseling to beginning farmers by the FSA.  Learning the right way to meet one's debt obligations right from the start makes abundant good sense.  This practical approach to teaching our country's future food providers all the angles of good business management bodes well for local agriculture.  I said it before, I'll say it again: locally grown food is the future of agriculture, not just here in the United States, but all over the world.  Eliminating exorbitant shipping costs when fuel is at a premium is one more aspect of this approach that will make life easier and better for all of us.  Knowing your local agrarian means he or she has the security of a built-in buyer, while buyers can be assured of getting the kinds of foods they want.  There's just no arguing with a win-win.

Yes, the times they are a'changin.'  Thank goodness, our Dept. of Agriculture is perceptive enough, not only to see the need for change, but to see the ways in which they can help farmers realize a better future.  Isn't it great that "new and improved" actually can mean small, flexible, and in keeping with the needs of the surrounding community?  It can happen, one farmer at a time.


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