By Stephanie Grinnell

A first-of-its-kind lender based in Unity has received its federal charter and will offer financing for small farms and food producers in the state. Maine Harvest Federal Credit Union accepted its first deposit in October.

Meanwhile, across the country, big lending institutions offering financing farms are scaling back. Last month, Reuters reported on one such large lender, which is experiencing significant defaults on loans to farms, mostly in the Midwest. Other major banks have been scaling back their farm-loan portfolios since about 2015, as prices fell due to a global grains glut, according to the Reuters analysis of FDIC data.

Reuters reported in June that Chapter 12 federal court filings, a type of bankruptcy protection largely for small farmers, increased from 361 filings in 2014 to 498 in 2018, according to federal court records.

Some smaller banks have turned to the federal government for protection, tapping a U.S. Department of Agriculture program that guarantees up to 95% of a loan as a way to help rural and community banks lend to higher-risk farmers, Reuters reported.

Maine Harvest Federal Credit Union is the only fully-regulated financial institution focused on growing a healthy, local food system in Maine through government-guaranteed deposits, according to its website.

Credit Union Journal reported last year that 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.

The effort to create Maine Harvest Federal Credit Union has been underway for several years. According to its website, the seeds were planted in 2011 by two separate initiatives that eventually blended into one, called Maine Harvest Credit Project, in 2013.

Heather Donahue operates a small dairy farm in Pittsfield. She told Maine Public last month that it’s often difficult for small farmers to get credit in Maine.

“Here in Maine, farms tend to be on the smaller side because of the land base that’s available, and those smaller farms are trying to make lenders understand the limitations in size there is as well as the type of operations we have,” she says. “Farming has a reputation of having an unstable income source, and that can make lenders nervous. And not all lenders are willing to work with farmers on flexible payment plans, or thinking outside the box.”

Maine Public reported that Maine Harvest Federal Credit Union plans to make $12 million in loans available during its first six years.

Maine Harvest FCU, like all credit unions, is a financial cooperative. Start-up equity has come in the form of grants. The result of business modeling and extensive regulator meetings resulted in an estimate for $2.4 million in start-up capital grants to create Maine Harvest FCU. Between 2015 and 2018, the credit union received commitments of $2.4 million from 23 donors, including 10 individual donors, 9 foundations, two Maine businesses, the Maine Credit Union League and one government grant program. The average donation for start-up capital was just over $100,000.

The actual application for a credit union charter started in 2017. The 1,000-plus page application, essentially a very detailed business plan, was approved by regulators and the credit union Board of Directors with the signing of a Letter of Understanding and Agreement on July 30. Maine Harvest Federal Credit Union’s charter was approved Aug. 14.

It exclusively offers business loans, regular share savings, and regular CDs, focused on filling a gap in the local farming and food production financing market. Depositor membership in the credit union is open to members of Maine Organic Farmers and Gardeners Association (MOFGA) and Maine Farmland Trust. Loans are intended for small farms and food producers.

Maine Farmlink offers a list of additional resources for farms to secure financing on its website that range from local to national lending and grant programs.