Farmers in Maine could soon get another choice for financing.
The state is home to a robust agricultural sector that includes more than 8,000 farms that produce $3.8 billion in sales and create 24,000 jobs. These farmers, especially smaller operations, will need roughly $186 million over the next few years to finance farmland, and other institutions aren’t willing to provide this credit, according to Maine Farmland Trust, a farming advocacy group.
A proposed credit union, which Maine Farmland Trust and others are organizing in Maine, is hoping to close some of that gap.
The Maine Harvest Credit Project would be the country’s first credit union that will exclusively provide loans and mortgages to local farmers and others in the food industry. So far the group has raised $2.4 million in capital from 23 donors, including the Maine Credit Union League, financial experts, local businessmen, farmers and others to help open the institution.
“During the past decade or so, we have witnessed a significant increase in small food companies and small farmers, and they will likely benefit from the type of funding services that this proposed credit union will seek to provide,” said Jim McConnon, a business and economics specialist and professor of economics at the University of Maine.
The state has everything from dairy, potato and blueberry farming to fisheries and the lobster industry. Fruits, vegetables, hay and cattle feed are also major parts of the sector, McConnon said. Overall the agricultural sector in Maine is “strong and diverse” with the number of food and beverage manufacturing companies growing at 3.5 percent per year for the last decade, McConnon said.
There has also been an influx of younger people in Maine who want to work in the food, farm and agricultural sectors, McConnon said. The Maine Harvest Credit Project noted that some 40 percent of the state’s farmers are 34 years old or younger. According to the U.S. Department of Agriculture, the
There is a growing demand from small-scale farmers, food processors and other agricultural-related businesses that need loans. That need inspired the organizers of the proposed credit union. The field of membership will include two statewide organizations, Maine Organic Farmers and Gardeners Association and Maine Farmland Trust.
The organizers behind the effort have extensive experience on Wall Street, as well as Maine backgrounds. Co-founder Sam May grew up in Maine and worked on a dairy farm. He went on to work as a senior wireless technology analyst.
Co-founder Scott Budde graduated from Bowdoin College in Brunswick, Maine, and worked in the investment management division of TIAA-CREF.
Budde said he and May first joined forces in 2013.
"Sam’s idea came out of his work with Slow Money Maine, a group focused on supporting local sustainable food systems, and a lifelong connection to Maine," Budde said. “Mine came out of social and community investing work at TIAA."
The credit union, which would be headquartered in Unity, will offer agricultural loans and mortgages, including land-backed mortgages, which are essentially mortgages on a small farm. These mortgages and agricultural loans can be more complex to underwrite and service and require significant assets and expertise.
But the spreads on member business loans, which are often higher than on consumer lending, should help offset the risk, Budde said. There are also fewer compliance concerns about member business lending than consumer, Budde added.
The Maine Harvest Organizer Group, an affiliate of the Maine Harvest Credit Project, is spearheading the chartering process, which can be long and difficult. The National Credit Union Administration has chartered one new federal credit union so far this year and four last year.
Todd Mason, president and CEO of the Maine Credit Union League, said that his group has been involved with the project from the beginning, offering advice and guidance through the chartering process. Mason said he is “optimistic” this one will get off the ground sometime next year.
“They are a very unique entity and there is great demand for their services in the state of Maine,” Mason added.
Budde indicated that there are some factors that will facilitate the chartering process for his credit union. Its specialization in terms of lending and deposit gathering should help. It has also streamlined the products it will offer, forgoing certain services, such as checking accounts and cash handling. Instead, it will gather deposits through savings accounts and certificates of deposits.
It will be exempt from certain consumer lending rules by focusing on member business loans. Credit unions that are created for the purpose of business lending and can prove their members need it are exempt from caps on these loans, Budde said. It hopes to lend up to $250,000 and possibly higher through loan participations and servicing agreements.
Finally, the organizers plan to make extensive use of networked services in Maine, such as coop- shared branching and the surcharge-free SURF ATM network. Both are accessed through Synergent, an affiliate of the Maine Credit Union League.
“All this will help us keep costs low and management focused on the unique needs of our field of membership,” Budde said.
The organizers of the proposed Maine credit union have already submitted an application for share and deposit insurance to the NCUA. Budde is hopeful that the institution will open next summer.
"They have already seen a draft and we have spoken with them several times over the last few years,” Budde said. “They have given us lots of feedback and asked lots of questions. Generally they have been supportive of the application and the comments have been helpful."
