In last week’s Community Capital webinar Tim Crosby, from Slow Money Northwest, led an inspirational discussion on how his organization has been using innovative techniques to get small farmers the capital they need to successfully start a business. Beginner farmers often don’t qualify for traditional bank loans and as a result don’t have access to the amount of capital needed to get a farm operational. So Slow Money NW went about connecting credit unions, farmers and impact (lead) investors to create the Farmer Reserve Fund.
Giving out loans is, understandably, a risky business. Banks only grant loans to businesses they think will be able to repay the loan. Slow Money, using the Farmer Reserve Fund, stepped in to offset some of the risk taken on by the credit union by providing technical assistance, enhancing the existing loan loss reserves of the lender and performing additional due diligence (finding a non-financial partner that can vouch for the applicant). By doing these three things Slow Money NW reduced the lenders risk and freed up the credit union to lend smaller amounts of money to new farmers.
Slow Money NW gets the money to increase the existing loan loss reserves from grants and donations made by individuals and foundations. The money is then deposited in an interest-bearing account at a credit union. As of now the Farmer Reserve Fund has 1:5 leverage of social investment - every $10k deposited generates $50k in loans.
For Tim Crosby, the bottom line to creating successful local economies is relationships. Since 2010 Slow Money NW has provided business development and technical assistance to over forty Washington and Oregon based enterprises. Nine of those businesses secured investments for over $5 million.