by Jane Primerano

A business plan, the “where do we want to go and where are we going to go” is the essential beginning of any farm business according to Henry Grinbaum, vice president of Farm Credit East who spoke at the Urban Ag Workshop in December, at the Cook Campus of Rutgers University.

“Urban agriculture is the future,” Grinbaum said. He noted, “We used to talk about agriculture as a lifestyle; it’s a business. And it’s easier farming with money than for money.”

Farm Credit East has been lending farmers money since 1917, he noted.

The first step is a business plan, he said. The plan must contain positive projections but also note the obstacles that can stand in a farmer’s way. Good financial records including year-to-date financials are essential.

“I don’t care what you gross, it’s the net that counts,” Grinbaum said.

“You’ve got to have skin in the game,” he told the farmers in the audience, “you’ve got to take the risk.”

He said today people tend to want to borrow all they think they need, but they must have something to invest. Collateral is essential and all budgeting must have room for adversity, he added.

Borrowing from Farm Credit is better than trying to borrow from community banks, Grinbaum said because Farm Credit can value assets banks don’t understand. He notes in 37 years FCE has only had to foreclose five times.

Money is also available from the federal government.

The Farm Service Administration is the arm of the USDA that provides both real estate and operating loans to farmers, Austin Baird explained. FSA can loan up to $300,000 to purchase land, construct building and for other capital improvements. The farmer must first be denied a loan by a community bank, which Baird said isn’t hard.

“Just ask for $300,000 for a hydroponic operation and see how fast they say no,” he said.

Operational loans can be for tangible goods, like equipment, for up to seven years, or for seed or similar products for up to one year. The FSA also makes loans for emergencies.

Microloans of up to $50,000 are not restricted to full-time farmers, Baird said. These can be very important to urban farming. The application must include a program plan, gross income (including non-farm income) and operating costs.

Loans for storage buildings and greenhouses can be based on the life of the building.

Youth loans from the FSA can help 4-Hers between 10 and 20 years old. The loans can help the kids buy a calf or a couple of sheep.

Gabi Grunstein of FSA said loans for farm storage, grain/hay storage, box trucks, refrigerator trucks. These loans can be up to $500,000 for a duration of three to 12 years. FSA also provides technical assistance in such things as food safety and handling. Disaster relief may be available for uninsured crops like vegetables.