Across the country and in Montana, one of the biggest challenges facing new, small farms is financing. Starting farming is a lean, slow process with small gains each year in exchange for providing great food for your community. But farmers still need capital to purchase seeds, equipment and more.
With help from CFAC, Montana’s farmers and ranchers will now have access to a new type of funding: 0% interest, crowdfunded Kiva loans. Unlike sites like Kickstarter, which allow people to make donations to businesses and sometimes receive rewards for those donations, all of the money lent through Kiva is expected to be repaid 100%. Loans can be up to $10,000 and lenders can loan as little as $25. Farm borrowers may also have access to a six-month grace period before beginning loan repayment.
Kiva is perhaps best known for international microlending, with 2.1 million borrowers and 1.5 million lenders spread across 83 countries. Kiva loans have a 97.1% repayment rate, based on a unique type of loan review that Kiva calls “social underwriting.” Rather than being reviewed solely on the numbers, loans are evaluated based on the business plan and the character of the borrower.
This social underwriting happens in three stages. First, borrowers can be endorsed by “trustees,” people or organizations who evaluate the business and the borrower’s character. The Community Food and Agriculture Coalition has recently been approved as a Kiva trustee and will be able to endorse loans for their members. After CFAC and Kiva have approved the loan, the borrower goes through a private fundraising period when they have 15 days to get 5-40 (depending on loan size) of their friends, family, and customers to loan them at least $25, demonstrating that their contacts trust them and their business. Finally, the loan is opened for the public fundraising period and each lender reviews the business and can evaluate the borrower’s likelihood to repay before making a loan.
“We know that many of the farmers we work with have a hard time financing their business – especially during the early start-up stages,” says Annie Heuscher, program director for CFAC. “These loans won’t buy the farm, but a lot of times, farms are shut down because of costs that aren’t overwhelmingly huge – just poorly timed. By providing low-cost financing, we believe these Kiva loans will help our region’s farms and ranches expand and grow and stay steady through the inevitable storms.”
CFAC will be able to endorse five borrowers at a time and is considering having a launch event this fall to promote Kiva and the first five borrowers. For more information on Kiva funding and on being endorsed by CFAC, visit http://missoulacfac.org/kiva-zip.html or contact Annie Heuscher at email@example.com.