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USDA Offers Small Loans to Farmers Growing for Locals

Memphis, Tenn. — With interest in locally grown food soaring, the federal government said last week it has created a small loan program to help community farmers who might not be able to borrow money from banks.

Call it seed money.

The low-interest “microloans” of up to $35,000 are designed to aid startup costs, bolster existing family-run farms and help minority growers and military veterans who want to farm. Over the last three years, there has been a 60 percent increase in local growers who sell directly to consumers or farmers markets, Agriculture Department Secretary Tom Vilsack said.

The loan can cover the costs of renting land, buying seed and equipment, and other expenses. One goal is to create more opportunities for entrepreneurship and employment in the farming industry, Vilsack said. Another goal is to provide beginners a chance to build credit, so that they can eventually qualify for higher-value loans and expand.

“It’s about making sure that we have diversity within agriculture, that we have a good blend of large production facilities, medium-sized operations and smaller operations,” Vilsack said. “It will help bolster the local and regional food system movement that is taking place.”

The loans could help urban farmers who grow fruits and vegetables — or raise chickens for eggs or bees for honey — on lots that can be as small as one-eighth of an acre, said Chad Hellwinckel, a research assistant professor at the Agricultural Analysis Center at the University of Tennessee in Knoxville, Tenn.

“These individuals lease city lots, so they need a small amount of startup capital,” Hellwinckel said.

However, Iowa State University economist and local food researcher David Swenson said that $35,000 isn’t enough to significantly help a startup farm or “capitalize any kind of meaningful food production system.” He said materials and equipment were just too costly.

Swenson also noted that local food production still makes up a very small percentage of the U.S. agriculture industry, despite its recent growth.

Swenson said the loan program is a positive first step, but the prospects of local food being a viable economic engine for most regions is highly limited.