New USDA Microloan Program Offers Funding for Small Farmers

Swapping out a laptop for a garden spade is the dream of many Southern Californians hoping to escape the office grind and reconnect with the land through farming. Two years ago, Jennifer Little and James Imhoff did just that: stepped down from successful, well-paying jobs to start their own vegetable and fruit garden, Little Farm Fresh, in their 7,000 square foot San Gabriel lot.

Little and Imhoff have found success growing and selling organic, heirloom produce and other fruits and veggies at the Beverly Hills Farmers' Market and the South Pasadena Farmers' Market, which is less than 15 miles from their home. A business run by a young, amiable couple, the venture is popular in the markets and usually sells out before closing time. Though their farm has been a success, like any new business, it's had its share of growing pains.

"We'd like to expand," Imhoff said, "but there really isn't any more room." Their lot includes the ground where their house sits and is covered with over 100 varieties of herbs, fruits, and vegetables. Although they know how much income their farm generated last year -- around $20,000 -- the whims of weather and markets make it difficult to depend on this income.

Little Farm Fresh is part of a new wave of beginning farmers who start their own farm businesses to later encounter the difficult challenges that are unique to small farmers in America. While there is growing, countrywide consumer support for local food systems, it is difficult to remain profitable by growing small batches of organic produce.

Local food producers face high barriers to entry into the farming profession. Accessing enough land to make reliable profits, Imhoff said, is their biggest hurdle. Other small farmers report that securing enough start-up capital is tough (especially for farmers who are starting from scratch rather than branching off from an already established business).

Due in large part to these dual challenges, small farm numbers are dwindling. The number of principal farm operators in the United States who have been in business for less than 10 years has decreased year after year for the past three decades. Similarly, the number of young farm operators has also decreased. In 1982, 16 percent of all principal operators were under the age of 35; by 2007 that number dropped to 5 percent.

To help support young and beginning farmers, the United States Department of Agriculture (USDA) recently launched a new microloan program designed to help small and family operations, including beginning and socially disadvantaged farmers, secure loans under $35,000. To appeal to this target demographic, the program offers an online application, a 1.5% interest rate, and flexible eligibility requirements.

"The two most pressing issues that smaller farmers face are access to land and access to capital," the State Executive Director of USDA's Farm Service Agency (FSA), Val Dolcini said. "This gets right to the heart of that second issue."

The program is part of a larger USDA initiative, "another tool in the toolbox," Dolcini called it, to encourage young and beginning farmers who are new to the industry. The USDA has supported programs that help new farmers and ranchers since the 1992 Agricultural Credit Improvement Act.

The new microloans are intended to cover smaller purchases, such as seeds, animals, small equipment, or other investments that new farmers require to finance their operations.

"Farmers who are looking to expand activities on a smaller scale, like buying a new panel truck, for example, can truly benefit from this program," Dolcini said.

Inhoff's eyes lit up when he heard news of the microloan program last week. He says he doesn't doubt the USDA's commitment to support small farm operations, but when it comes to actually getting help on a day-to-day basis, loans have been particularly hard to come by.

"Up until this microloan thing, we actually couldn't find any [suitable loans] at all. They all seem to be geared towards people who have acres and acres of land," Imhoff said.

The microloans will be funded through FSA's existing Direct Operating Loan program, and will provide small farmers with loans that are more appropriate to their funding needs: $35,000 rather than the current standard operating loan of $300,000, which far exceeds the annual income of most farms. (The latest Census of Agriculture numbers that show that 71 percent of all farm operations grossed less than $25,000 in 2007.)

"For a lot of farmers who work at CSA or grow food for 10, 20, or 100 people, chances are that they don't need the $300,000 operating loan that is available," Dolcini said.

They probably couldn't get one of those big ticket loans either -- FSA operating loans traditionally require several years of experience and existing equity.

Short of options in the past, many aspiring farmers have traditionally had to rely on credit cards or personal loans that have higher interest rates and less flexible repayment schedules than what is available with FSA loan programs.

Because Imhoff had substantial savings before he and Little started Little Farm Fresh, they did not have to apply for a loan to get their operation off the ground.

But between the drought and freeze of 2012, it has been a tough year. Weather is always the wildcard, Imhoff noted. Earlier this month, he returned to his office job to earn extra income and estimates that between that job and the farm, he now works about 80 hours a week. Little continues to manage the farm operation and does about 90% of the work for Little Farm Fresh, Imhoff said.

Still, Imhoff is optimistic about the growth of their venture and especially excited about the new microloan program. "I will say that I am definitely interested," Imhoff said.

Over the past month, the FSA has collected applications for the new microloan program. A spokesperson says that there has been considerable interest on the part of small farmers, consumers and the media and that they are still processing the wave of incoming applications.

Help with small loans: check.

This just leaves one lingering question for the FSA. Anything you can do about the weather?