In this episode we talk with Eric Bowman from the Kohala Center in Waimea on the Big Island of Hawaii about the entire range of loans and funding options available to ag producers in Hawaii, but in detail about micro-loans using crowdfunding and grants available from the Natural Resource Conservation Services (NRCS).
This podcast is brought to you by University of Hawaii College of Tropical Ag. and Human Resources (CTAHR), and the Seeds of Wellbeing or SOW Project. This podcast is supported by the Farm and Ranch Stress Assistance Network (FRSAN) grant from the U.S. Department of Agriculture, National Institute of Food and Agriculture and Hawaii Department of Agriculture.
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In this episode we talk with Eric Bowman from the Kohala Center in Waimea on the Big Island of Hawaii about the entire range of loans and funding options available to ag producers in Hawaii, but in detail about micro-loans using crowdfunding and grants available from the Natural Resource Conservation Services (NRCS).
This podcast is brought to you by University of Hawaii College of Tropical Ag. and Human Resources (CTAHR), and the Seeds of Wellbeing or SOW Project. This podcast is supported by the Farm and Ranch Stress Assistance Network (FRSAN) grant from the U.S. Department of Agriculture, National Institute of Food and Agriculture and Hawaii Department of Agriculture.
Resources:
Find out more about us:
Welcome to a Seeds of Wellbeing "Experts in the Field" podcast featuring people working in their fields of expertise to provide support for agriculture producers in Hawaii, in the United States, and in some cases around the world. These podcasts are made possible by a grant from the University of Hawaii College of Tropical Agriculture and Human Resources, also known as CTAHR, and the Seeds of Wellbeing or SOW project, and is supported by a grant from the US Department of Agriculture, National Institute of Food and Agriculture, and the Hawaii Department of Agriculture.
Eric Bowman:And when you know, right what I tell farmers is if they're trying to raise money, or they're feeling stuck, or they don't know where to go, or they don't know when, that what their next steps might be to raise money, this give me a call and we'll talk it through.
Jim:In this episode, we speak with Eric Bowman from the Kohala Center in Waimea on the Big Island of Hawaii. Eric works with ag producers on all the islands to help secure funding needed to start and maintain their farm or ranch. In this discussion, we focus on options for micro loans through crowdfunding, and grants that are available from the Natural Resource Conservation Service or NRCS. The views information or opinions expressed in this episode are solely those of individuals involved and do not necessarily represent those of the University of Hawaii College of Tropical Agriculture and Human Resources, our funders, or any of the organizations affiliated with this project. Now, let's hear more from Eric.
Eric Bowman:I think one of the success metrics in my job is helping people access resources. Iʻm at the Kohala Center currently, and where I've been for the just over the past four years, and they brought me on to manage their two microloan programs, one of which is in house and one of which is Kiva - is on Kiva. And really to focus on debt debt financing, I'm part of a broader team that works to bring resources into AG, including educational and then grant primarily through the Farm Bill program. Speaking about like debt financing. In general, I think there's like a ladder and some people have longer legs, and they don't need the lower rungs, they can just step right up. But you know, a lot of a lot of farmers are stepping into agriculture is very resource and very resource intensive, capital intensive, right, like takes land, you're, you're investing resources to build super long term infrastructure, like barns, equipment, fencing, and then you're going to put in crops, whether they're, you know, just take coffee, you're not going to get any revenue for three to five years. If you're doing field crops, even then you're looking at six, nine months until you're you're starting to really pull, it takes a lot of money, right? Frequently that money is inherited, just let's be frank about agriculture in general, that's, you know, maybe I think what's unique about Hawaii is that our agricultural sector is I consider post apocalyptic, twice. You know, there was colonization and the destruction of an indigenous cropping system and replace that with almost a feudal plantation system, and then that collapsed recently, you know, a few decades ago. I, my personal background is I moved here from Washington State where, you know, you would see these large family on farms, but it was still like, you know, great grandfather got the property and, you know, homesteaded it, and then grandfather, and he put in the orchard and the barns and then, you know, Dad, you know, while I was off to college, he really got us into, you know, good genetics and artificial insemination, and then we join this larger system, and then, you know, now, you know, the son or whatever is arriving, you know, they've been at this for century, right, with all this momentum and infrastructure. And a lot of people coming into ag they in Hawaii, they're just it was plantation land at went fallow, and then they're coming in either older, without a long runway, or and a succession plan, or younger without a lot of assets under them. So the, I think there's, so they come in with their equity, right, whatever that might be, and then, you know, you got to bring the money or you got to borrow the money. So, the Kohala Center has us focused on the sort of more of those vulnerable or disadvantaged producers who maybe you know, $5,000, $10,000, you know, $20,000 and below would really make a big difference. Maybe they're just getting their place up and running. They need fencing, driveway gravel, land clearing an initial barn. And then then, after that, kind of what I would call it microfinance, I would say there's like community development, finance. Like, you know, I know one of your future guests is going to be Steward, that would be that would be examples like one of the community development finance, Feed The Hunger Fund. And then, so that's maybe more like$50,000, maybe $20,000 to$60,000, that kind of that kind of range. And then a little farther up the ladder, you probably have the USDA, they're one of the largest lenders to Ag in the state, USDA Farm farm loans here in the county. That's Jennifer Balderas, and her team. And then, you know, then getting into more traditional route, or in commercial finances, Farm Credit, which is the Farm Credit System here, the division is called American Gg Credit. So that's Linus Tavares out of Hilo, they're the number one lender to Ag in the in the state.
Jim:And is that above the $60k mark or is that in the $20k and up mark?
Eric Bowman:You know, I would say, American Ag Credit can do almost anything. They can they can do small loans, they can, you know, they could do a $5,000 loan to an immigrant papaya grower all the way up to financing a $10 million coffee estate. So they really run the gamut. There. And typically, for them, they're gonna look at your revenue and your income. So if you're not strong on that front, a lot of times they can refer to the USDA. And the USDA has a cap of I think it's $600,000. I shouldn't don't quote me on that. But, you know, that's not enough to purchase land in Hawaii, right, you know, frequently, then you need to, you need a some sort of combination loan, either with, either with Farm Credit, or there's a there's a bank on the mainland that that will then come in on top of a lot of that, for like, you know, say the loan is like $800,000 to acquire the land.
Jim:Okay, that makes you like, I've been rambling on there a little No, no, hadn't yeah? I wanted to make sure I let you go because that's kind of the great spectrum of all the things available. It sounds like you just summarized it. Again, Kiva, just to confirm Kiva is an online platform?
Eric Bowman:Correct. Kiva is a it's called peer to peer lending or crowd funding. So you I, I tell people, if you, you need three things, you know, you need three things, you need a picture, business, and then the ability to write a couple paragraphs. And those paragraphs are one, a little bit about yourself; two what's a bit about your business, and then; three, what are you going to spend the money on. So then you get this campaign page, and you email, there's kind of two, two phases to fundraising, you can mail it out to your friends and family. They utilize a concept called Social underwriting. So your ability to connect with your friends and family to participate in the loan, and they have a target, depending on the size alone, maybe it's 6, maybe it's 22, but you got to hit a certain number of private individuals, and then after that, then you go public into the public fundraising period. And just an incredible amount of money moves through Kiva. I mean, they do like $2 to $3 million a week. There's just 1000s of 1000s of people who are eager to lending to AG primary, and I'm sorry, Ag, small business owners, primarily it's International, the domestic lending on Kiva is just a small portion of it. But people are very eager to participate in, in loans in Hawaii. We've, the call centerʻs participated in 80 loans. A goal is to do three a month. Last year, we did over two a month. And these loans range from you know, there was a cattle rancher launching a pet food company in Waimea needed to got some equipment and needed to rewire their barn for to 220 to run this more commercial equipment. So $15,000, boomp, paid for the paid for this one component of a larger project, for just one enterprise on the ranch. All the way to a beginning farmer who was bringing in genetics. So she was bringing in a very specialized breed of pig, Mangalitsas, these thereʻs this large pig. If you're going to a fancy meat shop in San Francisco and be like, "Oh, do you have Mangalitsa bacon?" or whatever people would people totally know what you're talking about. So andyways, it was $7,000 to bring in a couple of bred sows, you know, just with the warranty and the air travel and shipping, etc. So, you know, as an example I think we're more like a startup loan, where it's like the enterprise is just kind of getting off the ground.
Jim:And do you have, youʻve been doing this for a while, clearly, so with Kiva. Do you have a site or is there a place that explains how to all the ins and outs and nuances of Kiva and how that works? Do you already have a webpage? Or is that through the Kohala Center? Is that pretty much reaching out to you directly? What's what's, if people want to go down that road? Is there a place they can go online to find more information about that?
Eric Bowman:Excellent question. Everything that you just said applies, email me, just google Kiva in. I should mention that the Kohala Center became the hub for Kiva, so we are responsible for the market in, in the islands, so the minute somebody goes into itʻs, I canʻt remember, it's I think it's like kiva.org/borrow something or/apply or something like that. If you just google it, you'll find it. And if and as soon as somebody starts an application, I am inside their system, I log into the Kiva database every day, I get a notification that somebody started an applicant, and I'll usually reach out to them and be like, "Hey, do you have any questions." And if once they click "Submit," I'll do the initial screening, make sure it has the components in there, like they've uploaded their proof of business, that they've got eligible use of funds, in their description, etc. And then if that checks out, I advance it on to Kiva, which will do the review. Frequently, I have to go back to them. I mean, number one reason, a Kiva loan application gets kicked back to me, or I have to reach out to borrower is simply the picture. You know, they, you know, it seems so simple, include a photo of yourself at your business, but you know, people could picture their kid, which can't do or, you know, a picture of their of their, like, you can't see the face, you know. And the the thing I would stress is that, you know, if somebody's interested to just go, you know, either email me or go to the site, start an application, and it just, it just, it just really walks you through the process. It can take. If you're all ready to go, you're very tech savvy, got some paragraphs, you can cut and paste, you have scanned in your business proof documents, you could probably be done with an application in 20 minutes. If you're not very tech savvy, and gotta sit down and write a paragraph about yourself for the first time ever, it's difficult for you, it can take two hours. So it really, I think that it depends on the applicant, but it's not hard, you know. It's designed for, again, people who are on those lowest rungs of that ladder where they can't just walk into the USDA or American Ag Credit and get that get that working capital loan that maybe somebody who has had a more professional background, greater English language professor proficiency or education might be able to.
Jim:And it sounds like you're saying you're a resource and or the Kohala Center for assistance, if people are struggling with those paragraphs, perhaps. Is that true?
Eric Bowman:Absolutely. I have been on the phone with somebody while they're getting jammed up. And I'm like, "Just tell me about your life." and then I'm clickety, clickety typing away as they as they, they're like, there's no way I can write a paragraph. I mean, a paragraph, I'm talking three to five sentences. Right? You know, this isn't, this isn't the college level essay, but you know, some people have a very difficult time with that. So Correct. That's, I consider that. I mean, that's my job.
Jim:Great. And that that email that you're talking about is the one that I reached out to you with the Kohala Center one so that that's, we're free to share that one. It sounds like that's the one to use? Okay.
Eric Bowman:Absolutely.
Jim:So, as far as proof of business, I know a lot of folks, especially at the stage you're talking about might be in various stages of creating their business, business identity. The proof of business piece that you describe for Kiva, Is that is that documents of having set up an LLC or you know, kind of incorporation papers? Is it a GET, you know, certificate from the state of Hawaii, what kind of documents are required?
Eric Bowman:You pretty much listed them. And in fact, I, if you google Kiva proof of business documents, you'll you'll find them in that that that is the list. Bank statements, tax returns, LLC incorporation documents, they take pause at the GE Tax license. So usually, if somebody's applied for a GE Tax license, they're already engaged in commercial activity, and they have some of those other items. DBA doing business as, like you can just register that as a sole proprietor. Any anything like that that's kind of a relationship between you and a government agency, which frequently you need those items to get a business bank account anyway. So a lot of times somebody if somebody is even, even when businesses are what I would call it pre-revenue, many of them have already taken that step of either forming an entity or maybe they have just a little bit of income or they're they just got their bank account. So that the one of the restrictions on Kiva funds is it can't be used for personal purposes, like purchasing a vehicle or paying off a credit card. So, to that point, they are they're looking to they're looking to verify that you have some form of business activity.
Jim:Sounds like it may be less stringent than setting up a bank account with Bank of Hawaii. So it's a loan, is that correct? So you borrow it's a money you're borrowing through this web portal, and then you repay it over some set. Term and rate?
Eric Bowman:Correct. Correct. I would say that, you know, one of the, one of the main reasons that we are excited about it is at the Kohala Center, and we've been, we've been working on this for eight years now, but there's, it's, it's, it's fee free. So there's no interest rates, and then there's no loan closing fee. And it, you know, our interest in it is that it's, it's essentially pushing resources from the community into the into the food and ag sector. And to be clear, anybody can borrow from Kiva, whether your a gutter installer or a babysitter, you know, you can apply for a Kiva loan, it's just kind of our interest in our real engagement as a lender comes from the Food and Ag sector. So, I'm not answering your question but I promise I will. So like, in 2014, the Kohala Center launched a loan fund, focused on the county of Hawaii, and the, in food and ag, and that went well, so then we expanded it statewide, I think, around 2016. And then in 2020, we became the hub kind of more and more focused broadly. And we do work with some partners, for example, weʻll get a loan application in Waianae. There's a group there called INPEACE, so I'll be like,"Hey, you really need to talk to these folks." So, correct. Your question was, it's it is a loan, and the the money does not come from Kiva, it comes from lenders on Kiva. So it its really what it does is it packages all these other lenders, for example, Eric, just individually, is a lender. I got, you know, I just, there's a loan that attracts my attention. And I'll put in $25, and then, you know, and then the, you mentioned, loan term, typical loan terms are one, two, or three years long. So kind of short. And then so, once a month, if I made a loan for $25, to somebody that borrowed$10,000, once a month, I'll get a repayment. It might be like 60 cents, you know, because Kiva really is running that the data end of it, were they, the founder of Kiva knew the founder of PayPal, so they've negotiated kind of this fee free relationship with PayPal, that's kind of their, part of their secret recipe, not secret, but special recipe. So, so then people will pay via PayPal, and then what Kiva does is then parses out repayments to the I mean, on average, it's like 125 people or something per loan that have participated to pull this together. So it's a very long answer to what was probably a very simple question,
Jim:A very complete answer, I think getting a good understanding of that niche, is, will be will be valuable to a lot of people. I mean, one thing we hear regularly in the interviews and the surveys that we've done for Seeds of Wellbeing project is people are struggling with that, that spot where they need to, for example, put in a perimeter fence, right, that's usually step one. You are able luck fortunate enough to find and secure land. First step is to fence it to keep keep the invasive critters away. And, and so that's a struggle, because, as I understand it anyway, I think is it NRCS that that has loans available for interior fencing, potentially? But the extra perimeter fence, you can't, you can't get a grant or loan for. It's not an easy thing, and it's not a simple thing, and it's not a small expense. So sounds like Kiva might be a resource for people for that. Does that sound fair?
Eric Bowman:Absolutely. And in fact, we've done at least one if not more loans for for just that. I think in one instance, it might have been a like a school teacher who you know, was on the side kind of developing this ranch down at Kaʻu, and, you know, trying to get his his this thing together, but that that's exactly right. You know, I think at the NRCS, you know, I get a lot of new farmers, first time landowners who are reaching out to the Kohala Center and they're like, what, "Where do I go from here?" And you know, the NRCS is usually like one of the it's kind of a short little list of places I refer for people to and NRCS has a great program for financing some of that infrastructure specifically around your conservation plan and soil conservation plan and they will they will develop what they're on staff contact... chickens are going crazy so hopefully that's not too distracting. But you know what, once I you know, somebody from the NRCS mentioned, well, "If we had to do perimeter fences, then we you know, there'd be no end in sight. Weʻd have to do all the perimeter fences" and Iʻm like, well, you're you're probably right because everybody needs one. You know, with the pigs, and the situation that we have here with the the lot, that you cannot engage in agricultural production without it.
Jim:Absolutely. And so that sounds like that's a sweet spot. I think. So NRCS it sounds like you have an inside track on on where they're effective. We want to talk a little bit about some of the successes you've seen? And do you have a sense of their process a little bit, just to? Not that that you're the expert, right, but just just where they may fit in this whole financing funding stream that is so necessary for ag producers?
Eric Bowman:Absolutely. Absolutely. Well, you know, certainly back to that original comment that Ag is very capital intensive, and the way that I think many people, they think it's so simple, oh, just get some land make some food, but, you know, usually I tell people is step one is reach out to farm programs at the FSA. The FSA has farm loans and farm programs. And if you when you think of farm programs, that's kind of the portal so they'll give you a farm ID number. And you'll need that at the NRCS. So that the NRCS is the Natural Resource Conservation Service. Sidenote, super fun movie kiss the "Kiss the Ground," I think, where it was almost like a little documentary about the NRCS is, you know, very important agency. And you will call them up they usually booked about... those chickens are just not stopping. They'll usually booked about six months in advance three to six months. Theyʻll send out a soil conservationist is to walk your property. You'll learn a ton about your land. They'll look for, you know, their their resources they're trying to conserve, they shift over time, depending on the type of policy, community demand. They'll do some surveys to find out, you know, sometimes those resources might be like, water runoff. endangered species, I don't know, cultural preservation, I mean, it's not always soil and soil carbon, and tilth, but that is, soil is really their main their main focus. So sometimes I think they might be called in like, if there's like, you know, neighbor has, you know, grubbed the land, and now I'm getting all this silt on top of, you know, so they might come in and actually address a community issue. But, so they
Jim:Just, yeah, just to interrupt for a sec. So do you know if they have, do they have a resource on each island? Is it one that has to fly between islands? And are they do they charge for those services?
Eric Bowman:Excellent questions. They have districts. So we have an office here in Waimea and then there's another one in Hilo, I think there's either two or three districts in Hawaii Island. And every county, I'm sure is you know, I'm sure there's a there's there's, they might even be like a special staff member focused on Molokai and I know there's one on Maui, for example,
Jim:insert the appropriate hyperlink here.
Eric Bowman:And again, it's super easy to find on the web. And then there is no fee for their service. So they'll come out, they'll get you that conservation plan. And then they might work with you on a component of that plan. So I'll give you two extra two examples. I've seen them fund stuff like perip, stock tanks, so you can keep your animals from running in a straight line. Cross fencing, you want to do like maybe mob grazing. But to two successful projects, I saw, one one's largest cross-year program is the EQUIP, okay? Itʻs environmental, quality... insert appropriate hyperlink. And so they'll pay for I can't remember that much of the project 80%, 90%. You do need to bring some some some, maybe itʻs 75% You do need to bring a portion of resources into the project. A lot of times that can be sweat equity that can be later. I have seen farmers you know, they got a favor with Uncle down the road, he'll just come up and run his backhoe for a little bit and, you know, call up the cousins we'll put in the fence post, you know, there's your contribution. But you know, so this pig farmer got a $90,000 project put in pretty much at the expense of the of the US government. Steel building, concrete pad, pens for piggeries that way they could do the Korean Natural Farming pig system without grubbinʻ grubbinʻ through the dirt. The County and the Feds would prefer it to be on concrete even though, in my mind, it makes more sense probably to be in the dirt. Annother successful project we worked on also with Kiva was a greenhouse for one of the larger vegetable producers on Hamakua Coast, Mother Nature's Miracle. So you know, they make, they talk, I can mentioned this, itʻs not confidential ʻcause it's in their loan writeup, which you can find on the web, but the projects are our reimbursement based. So, usually that involves cash outlay by the landowner, and then they'll achieve the objectives of the project, and then the NRCS will come out and do an inspection and then then you'll get your reimbursement.
Jim:So it sounds like step one is, is reaching out to them and having them come on site for an initial assessment. Do they have other requirements, like you describe for Kiva, you know, business, LLC documents, things like that, I imagine, description description of the need kind of budget, budget
Eric Bowman:And I'm pretty, I mean you should have them on projections. instead of me digging deep into my memory banks, but I think they're they are looking to focus on agriculture producers. So they're going to be looking for that that Schedule F. Yep. That's really that's, that's the tax return kindaʻ like Schedule C, but for farmers, and it says to that, to your attesting to the to the federal government, I made this money in agriculture.
Jim:Yep. Okay, schedule F sounds like it's key and with Kiva, as well, as a simpler version, even then, for some of the documents that you were describing,
Eric Bowman:That would absolutely meet the requirements.
Jim:So NRCS, so yeah. So pay up front. So I've heard those stories of people say "I need a greenhouse, and so I had, so and so come out, and and I had to pay for it, but I got reimbursed." Was that an NRCS scenario potentially?
Eric Bowman:That's exactly an NRCS scenario. Okay. You know, what I do tell people is, if you need a greenhouse yesterday, you just got to build a greenhouse, like do not wait for the federal government. You know, so they could take, you know, their operating on their own timeline, right? They're understaffed and spread thin. Great. If you it's like a Venn diagram, here's what Congress has, the public has told Congress to do, and Congress has told the agency to do, and then there's resources in it for farmers. And then here's what a landowner might need, right. And there's some overlap. But you know, you can't wait for them. If you've got a viable business plan, and you want to move forward, just build a greenhouse. Definitely reach out to farm programs reach out to NRCS, schedule the conservationist, get that ball rolling. But I always tell people that that's a long, that's, you're playing the long game there. Which if you don't have the resources any other way, great, it's a huge resource. And I'm, I promise you the larger ranches and agricultural operations are absolutely taking advantage of those of those programs also.
Jim:If I were to reach out today, to NRCS, on the Big Island of Hawaii, do you have a sense of how long it might be before that greenhouse is built, and I'm reimbursed for the money that I'm out? If I were to go through NRCS for that?
Eric Bowman:I would be astounded if it happened in less than six months, and maybe more like 18.
Jim:Okay, so let's say a year.
Eric Bowman:There's a couple things that need to fall into, but yeah,
Jim:You say a year to be safe, yeah? Yeah,
Eric Bowman:Then there's some things that need to fall into place there, right? Like, you need to be eligible, and you need to have a conservation plan that kind of substantiates the need for it. You know, somebody was gonna call me, and, you know, and I do get a lot of these calls where people like "I need to greenhouse." and it's like, you know, it's kind of my job to think through like, what, How urgent is this? What resources do you have? What's the income that you have? Is there a place that you can tap existing assets? So to give you an example, you know, I spoke to a farmer, recently, who called me for loan inquiry on another island, an island that seen pretty explosive growth in real estate value the last two years under the pandemic conditions, and she actually needed a barn, a greenhouse, but for packing produce. And, you know, oh, you know, what's your adress? Okay, you know, just looking it up, pulled it up on Zillow. You know, she's like, "Yeah, you know, we just paid $800,000 a couple years ago," I said,"Well, it's worth $1.4 million now, you know, so you're not going to get a cheaper, longer interest rate, and at this point in time, then a home equity line of credit or cash out refinance. So if you really do need," I think, in her case, she needed like about $150,000, you're gonna, you know, and if cash flow, you know, so I'm trying to figure out does she just, you know, there's, there's a loan program out, you could probably get like a seven-year, five-year, seven-year term and at a 4% interest rate, you know, probably do that quickly, or if you want to pull the money out, and then really stretch that out over a very long period of time, and in this instance, it was a, how do I say, it was a very long term asset, right? Like this was going to this was going to increase the value of a property. And it was going to be something that was going to be used for decades and decades to come. So in that kind of case, since it wasn't like a consumable, again, this is an example where NRCS, not a fit that at all, because it didn't really have any implications for resource conservation. But then, you know, then, you know, kind of my was my job working with her to figure out which, which sources of capital made the most sense for the project that she Ultimately I think she went up to the USDA. Just to comment, at the risk of babbling here a little bit, Jim, the USDA, we have, you know, Buddy Nichols has taken over the FSA, he was from Maui. He wasn't he was a very, I would say, aggressive about going out and supporting farmers and finding, you know, oh, we, you know, feel like we want to do this loan, it doesn't quite fit, how are we going to make this work into the Federal way. Very creative about trying to pull these programs into benefiting small farmers. And, you know, just talk with USDA staff around the around the state, like they feel this pressure, like I need to, I need to if if farmers need capital, we are here for them, if they can't get it elsewhere, from farm credit, or the bank, or wherever, like, we'll find a way to make this work. And it's a very good, I would say it's a very, I want to applaud the posture of the State Department of USDA, the State want to know the language or whatever, just the USDA, in our, in Hawaii is, is really there to find. You know, they come from a perspective of audit, a lot of commercial bankers start from a place of like, "How do I say no?" then I feel like they come from a place of like, "Alright, how do we make this work?"
Jim:Nice. And FSA stands for?
Eric Bowman:Farm Service Agency, and the Farm Service Agency has farm loans, which is where this person went, ultimately, and then there's Farm Programs. And then the Farm Programs are like Disaster Recovery. We have some weird stuff here like, for example, the Remote Transportation Cost Program. It's not life-changing, but it's for any of these remote parts of the US and its territories like, you know, Samoa, American Samoa, Puerto Rico, Alaska, there's some unique things that they've set up to, you know, just to get a shovel here, right cost maybe 20% more because of shipping, so they'll pay for a portion of that for example.
Jim:Great. Just to go back to that instance, where it was advisable to get a home equity loan would have you found that it's, you know, folks like like American Ag are make that process simpler than traditional banks? Or is it pretty much if you can get a home equity loan, go for it anywhere? Do you find that if there's an ag component to it, that there's more of a struggle unless you go with through a banking outfit that is familiar with it?
Eric Bowman:Speaking broadly, what I always tell people to do is shop around, right? Get a couple of different quotes, bids, whatever you wanna call it, contact your primary lending institution reach out to the American Ag credit, because every lender has their own box. The thing about your your, your your home loan servicer, or credit union or bank is that you know, the Feds back home loans, and has to fit in a box. It's called conventional mortgage lending. Qualified, qualifying mortgages, there are a couple different terms for this. So if you're in that box, boom, you're gonna get the standard kind of rate. So if you're in this case, it was like they were really it was a resi, for them, they would have gotten a residential refinance. So they're not exactly in a neighborhood, but they had they had a home that you could land on based with a conventional mortgage loan. American Ag Credit is really looking at ag land. If there's a home on it, "Yeah, that's fine. We can do that too." but they're really looking at that, that the farmland so whereas it's like a totally different mindset. So bank is gonna, like ignore the farm element, because they don't that's not their Fannie and Freddie. American Ag credit, they're not really looking at it, conventional mortgage, residential loan, like that's not. You come to them for a farm that has a home on it, but they're lending on the farm and the farm income and your off-farm income. Does that make sense?
Jim:Yes, that's helpful. I think it helps distinguish, who I might want to turn to and actually, it shows some variety that might be helpful to have in the mix as you're pursuing options. And I guess one thing about, you know, Kiva and NRCS are, are there's ceilings or floors to income? You've mentioned income levels that is potentially a factor and how much income you're able to generate or what assets you have. Are there certain floors or ceilings that one needs to either meet or would hit with those funding streams.
Eric Bowman:I think the in terms of a floor, that's going to depend on how much money you need to borrow. Every lender is going to at the end of the day, they're going to ask themselves,"Can we reasonably expect to get our money back?" I mean, it's unethical to lend somebody money, if you don't. And so if your loan payment, I'm just going to try and keep this super simple. If your loan payment is$1,000, they're gonna come there's a ratio in lending called the debt service, this is so advanced, it's just like not something, there's a debt service coverage ratio. So if you're, if you're if you want to borrow, if your loan payments gonna be $1,000 a month, they're gonna want to see that you're generating $1,000 a month, plus, let's call it 20%. So 1,200,$1,200 a month in, in excess revenue, that you're gonna be able to devote to that loan payment. And they don't really care if it comes from your W-2 job, your day job, salary, job, W-2 job or if it comes from farming income, but it has to come from somewhere, right? And the USDA is really good about looking at, okay, you produce crop X. And, you know, let's say I'm trying to come up with something simple like coffee, you produce coffee, you have 10 acres, you produce this many pounds per acre, you want to take on another lease, that's going to be 20 acres, you've demonstrated a capacity to generate X amount of income from X amount of acres. How's that gonna play out for this expansion? Right? Other lenders, Farm Credit for example, I don't know how much they can lend on that kind of a projection. Right? But my point is, there's not necessarily a specific number that's going to be the floor. It's going to be based on how much you need, what it is that you're going to do with it, and how do I say, just your ability to be able to demonstrate that you'll be able to make those loan payment.
Jim:And the good good thing about having property in Hawaii, as you mentioned, it can be a million dollar property pretty quickly and easily these days, especially so will they look at that on a balance sheet and say, well, you have a million dollars, well, on you're sitting on your balance sheet of properties so you don't qualify because you have you have too much, too many assets, or too valuable an asset or are they, are you're not seeing that too much?
Eric Bowman:I've never encountered that. I think that they would look at, they would look at your balance sheet as being I think they would evaluate that as a position of strength. And if it's going to be an asset-based loan, having equity in the property, particularly if there's going to be a mortgage against it, that would be very beneficial. You know, I will say that everyone, a lot of the people that I talked to, they're so focused on paying their farm off, they may be unwell in other portions of the world, in the corporate world, or whatever. And then they, they have a retirement, they bought this land. And I mean, a lot of people who are, I would say like land rich and cash poor. They're millionaires in land, and they are struggling to pay their bills. And I don't necessarily agree that this was the best way to organize society. But we really financialized assets.
Jim:We would like to thank Eric for sharing all this great information about small loans and grant options available to Hawaii egg producers, and also for offering to be a resource to help them in our 2022 survey of nearly 350 ag producers in Hawaii, financial issues like Debt and Cash Flow, we're near the top of their list of things that cause them stress. So we hope this information from Eric will prove helpful to many of you.
Eric Bowman:And what value is it to you to have a million dollars in land and not be able to do anything with it, right? A pile of cash and a farm farmland, it's dead until until humans come into it and engage it and do things and hire people and irrigate it and feed it and till it and and put it into, martial it into action. You know, and it is enviable, to be able to like own land outright. generate enough revenue from it. But is that equities highest and best use, sitting, locked away in just simply the real estate?
Jim:I think yeah, I think that's maybe a great way to end. I know you have to go. I kindaʻ I like that as a summary. Breathe, breathe life into your into your land and and use your money to have something that brings life to the land. Perhaps The intention of this podcast series is to create a safe space for respectful and inclusive dialogue. With people from across a broad and diverse spectrum involved in growing and making accessible the food we share together. A diversity of voices, perspectives and experiences can serve to deepen mutual understanding, to spark creative problem solving, and provide insight into the complexities of our agricultural system. If you, our listeners, have experiences with Hawaii agricultural ecosystems, from small holder-farms to large, even including multinational agricultural, industrial companies, or anywhere in between, and you would like to share your story, please contact us. We welcome your voices and perspectives. And thank you for listening to the Seeds of Wellbeing "Experts in the Field" podcast featuring the perspectives of service providers working to support ag producers in the Hawaiian Islands, the United States and beyond. If you found it helpful, please follow like and share this episode. If you have ideas about how we can make it better, please let us know in the comments or use the link on our website.