The Best Ways to Fund a New Farm
May 08, 2024
If you don’t have any seeds to plant, you’re never going to grow a crop. Similarly, if you don’t have any capital to invest, you’ll never be able to build a farm. It doesn’t matter how much training you do or how much horticultural knowledge you amass, you’ll be stuck.
Securing funding can be one of the most challenging steps of building a farm. It’s no surprise that a lot of hopeful growers get derailed here. However, although many think that the only sources of funding are either personal savings or investors, there are many more options. Do your due diligence to see what will be right for you!
6 Potential Funding Sources for CEA Farmers
1. Personal Savings
An obvious source of funding, many people go into CEA farming as a second career after carefully saving, or in some cases receiving an inheritance. If you can fund your own farm, even partially, you’ll be on a quicker road to profitability. Of course, if you have the cash on hand, you might still benefit from supplementing your personal stake through other means.
2. Conventional Lenders
Many conventional lenders like banks offer business loans with federal backing and competitive rates. Some institutions offer commercial real estate loans which may help you acquire the land and structures you need, while other programs, like the Federal SBA 7(a) loan are more widely-encompassing. There’s no shortage of financial institutions looking to make economical investments. If you have a pre-existing relationship with a conventional lender, that’s a good place to start, but always research your other options to make sure you’re getting the most favorable terms.
3. Specialized CEA Lenders
Contain is a great example of a company that specializes in connecting indoor farmers to lenders who have experience in the sector. Specialized lenders may offer higher rates, but their subject matter expertise can make them ideal partners for growers. Additionally, because of their relevant experience, they are often able to help qualify potential loans more straightforwardly than lenders without CEA lending experience.
4. Federal Loans Like USDA Microloan
The USDA’s Farm Service Agency offers multiple financial resources including a microloan program of up to $50,000 for qualified applicants looking to buy, build, or expand a farm. While restrictions apply to these programs, qualified applicants can expect the lowest interest rates available. Definitely worth looking into!
5. State Level Grants and Loans
In addition to the federal programs mentioned above, many states have their own programs to support residents. In some cases, this can include grants designed to encourage economic stimulation. These types of programs vary by state, but make sure to do your research here in order to avoid leaving money on the table.
6. Venture Capitalists
Of course, finally, there are no shortage of investors who are looking to expand their portfolios by offering cash infusions in exchange for ownership stake. While VC’s have become more wary of the CEA sector in recent years due to examples of over-leveraged failures, there are still plenty of deals to be made.
Each one of these bullet points represents a whole world of opportunity, and the purpose of this article is just to increase awareness of the diversity of funding options available.
AmHydro is not a lender, but if you’re researching your projected costs, feel free to reach out to our sales team to inquire about our all-in-one Get Growing packages. If those packages aren’t exactly right for your goals, we can also develop a custom quote. Either way, before you can start applying for loans, investment, or grants, you’ll need a good handle on your farm’s financial needs, and we can help.
Good luck! We’d love to hear from you.
