Interview Summary

So, let’s begin with this. How is farm financing usually done and how does it come up short in this context of regenerative agriculture?

Sure. A lot of conventional farm financing comes from local banks and farm credit branches in the form of debt, operating loans, and lines of credit. These lending instruments tend to favor farms that grow commodity crops or raise animals in conventional ways. The farms often have a history of farming. They may come from farm families, they may have established relationships with these lenders and they’re practicing agricultural systems that are very common and known, and the models have been proven out. The lenders are very familiar with these models. Regenerative and organic farms often have diversified systems. They’re growing lots of different crops. They may be beginning farmers who don’t have a long history of farming or come from farm families. All these factors make them perceived as riskier to the lenders. The other aspect of regenerative and organic agriculture is that they often are operating on longer time horizons. The implementation of these practices or transitioning to organic agriculture may take a longer time and may need more time to repay back a loan. Often traditional lenders are not as familiar with these systems or don’t have the flexibility to extend the loan repayment times.

Okay, that makes sense. So, there needs to be some ingenuity here because the traditional models aren’t applying. Can you tell us what a soil wealth area is? It’s a very interesting term.

Sure. We define soil wealth areas as special purpose soil wealth improvement districts that act as magnets for investment in regenerative agriculture. I can break that down a little bit, starting with the word soil wealth. We coined that term in a 2019 report and it really encompasses both the environmental and social benefits of sustainable regenerative organic agricultural practices. A lot of people are familiar with the word soil health. So, that is building soil health. It’s improving biodiversity, improving ecosystem services. But the other really important aspect is the people side the social side. So, how do we build social equity through these agricultural practices? How do we build wealth in rural communities, create resilient landscapes, healthier environments to live in? Looking at the term ‘area,’ we’re referring to a district model that is actually pretty common in agriculture. There are conservation districts that have been established by USDA, NRCS, there are farmland protection districts and economic development districts. So, the reason behind why we’re prioritizing this sort of place-based approach is that we think places is actually really important, and this helps build trust with the communities and the practitioners in these soil wealth areas. It helps to prioritize culture and heritage, social connection and the community dynamics of that region. So, the soil wealth area is a region or a a district that connects both capital providers with the capital seekers on the ground – so agricultural producers or value chain businesses – and it also can provide resources like agronomic technical assistance or business and financial readiness, technical assistance which also is really important in terms of the viability of these place-based businesses.

It’s a very appealing concept because there’s a lot more going on in a community or about district of land than just the number of bushels per acre. You’re pointing to not only the soil health, but to the health and wellbeing of the people who live there and work there and things like that. It’s a very interesting and and holistic concept. So, given this broad focus of this concept of a soil wealth area, how can financing be done differently?

That’s a great question. I think financing can be done differently in a lot of different ways. There’s not really a one size fits all when it comes to financing regenerative organic businesses. So, I can provide some examples of what that looks like. Sometimes it’s one particular type of finance and sometimes it’s lots of different types that are blended together. This could look like a low interest loan or a loan with flexible repayment terms that may come from a community bank or a CDFI. It could look like a loan guarantee or credit enhancement that actually enables a lender to make a loan they may not otherwise have been able to make potentially because of perceived risk or allow them to reduce the interest rates so that it becomes a little bit more viable for these agricultural producers and entrepreneurs. Through this research, other CDFIs and impact investors and peer-to-peer lending networks have come up with innovative and creative ways of how to finance place-based producers and practitioners. In addition, I think philanthropic capital and grants are also a really important part of this and that they can support farmers and entrepreneurs either directly, or they can help fund technical assistance that really helps support them understand the types of financing they need or makes the lender actually a little bit more confident in making that loan.

So, are there steps that can be taken to get to the point where these creative forms of financing are happening?

There is definitely the need to scale up this type of financing and access to capital for agricultural producers and value chain businesses. The model that we are proposing is top pair the soil wealth areas, this very place-based component, with a network of capital providers that may not be place-based. They may be national in scope. We want to help facilitate and coordinate these types of relationships. We call this whole ecosystem the Soil Wealth Community. And, then we have what we’re calling the Soil Wealth Capital Collaborative. That is the network of capital providers that can come together, learn from each other, and use that network to allow them to expand and increase how much they are providing and able to fund regenerative businesses.