In this episode we speak with Ryan Anderson from Steward Lending, and Eric Bowman from both the Kohala Center Business Services Team, and Loan Officer for Feed The Hunger Fund, about financial assistance available to and focused on ag producers.
Brought to you by University of Hawaii College of Tropical Ag. and Human Resources, and the Seeds of Well-being (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 speak with Ryan Anderson from Steward Lending, and Eric Bowman from both the Kohala Center Business Services Team, and Loan Officer for Feed The Hunger Fund, about financial assistance available to and focused on ag producers.
Brought to you by University of Hawaii College of Tropical Ag. and Human Resources, and the Seeds of Well-being (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.
Associated Links:
Find out more about us:
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. 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 were 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:A word that comes to my mind when I think about our agriculture is apocalyptic. It's that the plantation system wiped away a totally sustainable indigenous cropping system and replaced it with a very more brutal corporate version of it. And then that collapsed, recently, you know, like in the 90s. And the strategy was, well, maybe we'll set up kind of this more family farm system. And it hasn't really taken hold what I mean, I've seen a lot of farmers household budgets and tax returns, and there's a portion of them that you're like, Wow, good for you. You're doing what... you found a niche work. And then there's just 90% of the rest of them, where it's, they're really having a hard time holding it together.
Ryan Anderson:If your sales are CSA, if you're a market garden, if you're doing that farmstand restaurant sales kind of work, it can really be sometimes difficult for those traditional lenders to understand the true value of your business and the economic potential you have with what you're doing. So those are the kinds of opportunities where, for Steward we really try to get to know the farms that we're working with and understand how their business is going to operate in a more nuanced way.
Jim:In this episode, we speak with Ryan Anderson from Steward Lending, and Eric Bowman from both the Kohala Center Business Services team and Loan Officer for Feed the Hunger Fund, about financial assistance available to and focused on ag producers. Now let's hear what they have to say about funding options for Hawaii's ag producers. One of the top stressors for Hawaii egg producers is related to finances, finances big and small. Where do you get funds if you need them? Are there grants available things like that. So thanks. Thanks, again to both you for being on for this interview and to share what you know about solutions for our ag producers. Eric, if you want to start with a quick introduction of who you are, and your background and what your role is and ag in Hawaii.
Eric Bowman:Thanks, Jim, I appreciate the opportunity to participate in this conversation with you. I work at the Kohala Center which is based in Waimea, we work around the around the islands. My primary role and part of a team, a business services team, and my primary role is supporting the financing of small owner operators in the food and agriculture space. So a lot of farmers and ranchers that I work with directly. We're also a micro lender. And then I also work as a Loan Officer for Feed the Hunger Fund. And I have a portfolio of clients whom Iʻve supported access debt capital, and at least one of which has relied on Steward. And so I heard Steward once referred to itself as a, say nonexclusive collaborative lending partner. And I think we view ourselves that same way that we will frequently put a small loan into a, into an operation with the intent of kind of grooming them on to larger and bigger sources of commercial debt. And with, I would say that's like a big component of what I do, but wrapped around all that is a real focus on technical assistance as a kind of coaching and consulting the farm owners and operators to whatever their challenge might be, particularly as it relates to capitalization and management, financial management and that kind of stuff, understanding their finances, business planning.
Jim:And when and you're you said Kohala Center and you are on the Big Island of Hawaii, but you you provide these services throughout all the islands or is it focused on a certain territory or region?
Eric Bowman:Correct. Well, I would I would say our moku is North Kohala. That's our home. That's where we're located. We have probably 80% of our clients are on Hawaii Island, but that might just be more related to our network in proximity but we get resources from the USDA and the State Department of Ag and Olupono to provide a technical assistance throughout the islands. On just on a personal note. I've worked with clients on Molokai, Lanai and Kawai. Itʻs probably the least active on Oahu but that's just more a function of the economy there.
Jim:Thanks so much. Ryan, please share a little bit about your background and what you do with Steward.
Ryan Anderson:Yeah, absolutely. Jim, Eric, thank you for having me. I'm Ryan Anderson. I'm the Senior Vice President of services at Steward, sadly, not based in Hawaii. I'm in Portland, Oregon. And Steward, you know, in a nutshell, our mission is really to help human scale regenerative farmers grow successful businesses. Sort of the biggest service that we're providing folks at this point in time is financing. We are a private commercial lender providing loans to support small farms and food businesses in the regenerative agriculture community. And then, in addition to that, we're really seeing a lot of need for additional support that goes along with that lending. Anytime you're going to be taking on debt, you obviously want to make sure that you're doing so responsibly, and that you're really managing that liability properly. And so we're providing a lot of additional business support services, technical assistance to our borrowers. And then in addition to providing loans ourselves, also looking at alternative financing options, and ways that we can support our borrowers there. So we're also writing USDA grant applications, sourcing different opportunities, with folks just to try to round out the financial support that we can provide to our customers.
Jim:There's some similarities there between what Eric describes he works on and what you say, you and Steward do. Maybe Eric, you know, Steward well enough to know this. And there's this whole spectrum of, of loans and and grants and and funds that are available to ag producers in Hawaii. Do you have a sense of what maybe just a quick review of what those are from small to large? And then maybe we're a Steward fits into that mix?
Eric Bowman:Absolutely. That's a really good question, Jim. And, you know, I'll even preface your preface with a comment that, you know, agriculture is very capital intensive in a way that I think a lot of beginning farmers, and ranchers don't quite realize. And frequently, farmers and ranchers are managing an intergenerational asset over time. So in Hawaii, as you and I've checked, chated about before, people are coming in kind of under resourced to an ag sector that requires a lot of investment. We don't have the sort of systems and infrastructure that would exist in like a, like an another Pacific Rim state, such as Oregon, where Ryan's going in from. So kind of with that in mind, you know, farming takes a lot of cash, right? And so I would say there's a whole collection of like entry level cash, that's small amounts to kind of either tackle a project or to how do I say, just kind of keep keep keep something moving.All the way up to, you know, commercial real estate acquisition, expansion, expansion, financing, infrastructure, infrastructure development. And so a lot of my time is spent at that very bottom rung with people who are disadvantaged, vulnerable, low income, whatever, you might want to categorize it as, they're just getting started. Maybe they don't have the cash flow and the asset or equity base to really leverage as collateral. So as with that in mind, we the Kohala Center represents Kiva. So we do some micro lending on Kiva, do a couple of those a month that average is about $8000, or maxes out at about $15,000. I like to say if there's a ladder, that's for people whose legs are really short. Then the next rung up would be Slow Money, Feed the Hunger, probably Steward. You know, people who need, you know, more like $25,000 $50,000$100,000 working for working capital or equipment purchasing. And then, and Iʻm hoping Ryan can can add on to this when I'm when I'm describing another second here, and there'll be, and then Iʻll shut up finally, and then adding on top of that there would be the USDA. So they have both. They do microlending and they do working capital loans, and they do farm acquisition loans. Their farm acquisition loans cap out about$600,000, which, you know, most of the country farmlands about$10,000 an acre, here it's like 10 times that. So that doesn't go as far here as it does throughout the rest of the continent, continental US. And then the probably the number one largest lender to ag is American AgCredit, what used to be called Hawaii Farm Credit. Itʻs part of the Farm Credit Services, which is a network of borrower managed coops around the country. So they're definitely, if you're gonna buy a large farm and you have revenue, and you're probably bankable, they're, they're probably your first stop. If you get a denial from Farm Credit, American Ag Credit, then youʻll probably go to the USDA. If you have some issues going on. I'll give you an example. Somebody down in Waipio Valley, for Ryanʻs benefit, it was wiped out by a tsunami. It's unclear where where boundaries are, it's difficult at times to get a clear title because there might not be road access. So you know, traditional lenders gonna look at that and be like, "I can't, what are we supposed to do here?" You know, so then they call, they called some of those more alternative community development financial institution lenders to be like,"Hey, can you guys take a look at this?" So I would say there's a range of options. And even though it might sound like there's a ton of a ton of them out there, they each kind of have their own specialty. And there's kind of a limited scope for where people kind of play. I would be curious how I was maybe off or where you could see, Steward for any of that, Ryan,
Ryan Anderson:I think that's a good description of the landscape. So thank you. But Steward really operates at all of those scales. So our smallest loans, we've done loans for$5,000 for new and beginning farmers who are really just starting out. We just a month ago completed a loan for $1.4 million to a project in Vermont, to expand their agritourism business on a regenerative grazing sheep farm. And so we really, when you're looking at the sort of dollar amounts there, we're active at all of those ranges and can serve customers, anywhere from, you know, the small beginners all the way up to really experienced operators with large operations. I think the thing that really distinguishes Steward from that other cohort is, you know, one, you know, we're a certified B corporation. Weʻre a mission driven lender who's really focused on providing that support to sustainable and regenerative farmers. And so, you know, we're looking specifically at the Ag practices, and the regenerative practices of those farms to make sure that we're having the right kind of impact in our lending. And then also, we're really focused on understanding where there's value in regenerative agriculture in a way that Farm Credit or the USDA just aren't there yet. So, you know, it's interesting that you sort of bring up Farm Credit, now Ag America services. When I was farming, back in Detroit, I was a tiny urban farmer in Detroit. And when I was looking to buy land and expand, I went to the Farm Credit agency in Michigan, to have that first conversation and see about getting funding. And there are just ways that those institutions don't understand regenerative agriculture. And so, you know, I think relevant to Hawaii, they had an issue with land prices. As you can imagine, the land prices in the city are more expensive than the rural average in the United States. And so they were uncomfortable with a mortgage where you know, there's value in the property, you could resell it also at that higher price, but they were bound by a pretty strict analysis on those prices. Similarly, with, you know, the cost of the items that you're selling, as you go through the lending process, one of the things that a lot of lenders are going to be asking you for, in various forms, is a pro forma, right. Some sort of document showing your anticipated sales, your anticipated expenses into the future. And one of the key sort of aspects as you put that together is what's the price I'm going to get for the agricultural products that I'm selling. And when I was purchasing property, you know, my, my customer base was restaurants. And so the carrots that I was selling, I could get, you know, three even $4 a pound for carrots. They were, you know, beautiful multicolored, I'm selling it to restaurants that are featuring it as a key item on the menu. So I'm getting a really good price. But those Farm Credit institutions could only underwrite based on the idea that it was a commodity product, carrot, at, you know,$1 a pound or less, when it was like 80 cents a pound was the commodity price for carrots at that point in time. And in their perspective, that's like the clearance price of carrots. If you just have to unload your harvest that year, you can sell it as a commodity for 80 cents. And so that's what they wanted to value my productive capacity for carrots in the future, whereas the real price I was getting was three and four times as much. And you see that a lot with smaller producers, people who are doing diversified vegetable operations. If your sales are CSA, if you're a market garden, if you're doing that farmstand restaurant sales kind of work, it can really be sometimes difficult for those traditional lenders to understand the true value of your business and the economic potential you have with what you're doing. So those are the kinds of opportunities. Where for Steward, you know, we really try to get to know the farms that we're working with and understand how their business is going to operate in a more nuanced way, then Farm Credit or USDA is going to be able to.
Jim:So if I'm, if I'm hearing you correctly, it sounds like, to use Eric's metaphor, it sounds like you're all up and down that that ladder that he described. And and at the same time, you're kind of side by side with the Ag producer, very much like like Eric is it sounds like. There's a couple of terms I guess I'd like to ask you to define a little little for me, terms like regenerative, regenerative, l tried to say it again, regenerative. You know, words like organic get tossed around and natural, you know, regenerative is kind of a catchphrase to some I think, but I think that would be interesting to know. Human scale you you've mentioned. So and actually maybe the simpler one is certified B Corp, I'm kind of curious what what we should take away from from that phrase, or from that term certified B Corp, as well as kind of human scale regenerative farmer, what what, what does that mean?
Ryan Anderson:Okay, let me try to run through that. So B Corp is easy. That's a certification from B labs. And this is basically just a designation that demonstrates the social commitment of the business that you're running. So B Corporations are pursuing a social benefit, in addition to profit, and, you know, elevating the value of that impact and the importance of that sort of social impact on their mission. So, you know, in our case, that's supporting regenerative agriculture. We have a definition of regenerative agriculture, our regenerative framework at Steward. It runs four pages. So I'm not going to get into all of the details on that. But you know, at a at a top level, there's really two
key aspects:one for us, we see regenerative agriculture, as a philosophy that really acknowledges the harm that has been done by conventional agriculture. And then it's a set of practices that are aimed at repairing that damage. And we're looking specifically, you know. Everyone, I think, has a lot of familiarity with the environmental aspects of that equation and thinking about the way that pesticides are bad for biodiversity. It's killing the soil health, there's a lot of negative impacts there. And similarly, you know, when we're talking about not using synthetic chemicals, using no till low till practices, you know, using regenerative grazing, you know, all sorts of those, you know, silvopasture, alley cropping, those kinds of practices, there's an environmental benefit to that. We also really want to make sure that when we're talking about regenerative agriculture, we're also looking at systems that are regenerative and restorative for individuals. Like the farmers who are running that operation, the employees, the labor practices that are being utilized, as well as communities, right, we want to make sure that these small farms and these regenerative operations are providing a better input and sort of impact on their local communities than the conventional system does. I don't know if you happen to see just today actually, Food and Water Watch put out a really amazing report on pork production in the state of Iowa and They did the research to really show how between early 80s and, you know, 2017, there was this concentration in the pork industry in Iowa. And the result of that concentration, the counties that had the highest number of pigs in the county and the most concentrated operations, also saw the steepest reductions in household incomes and jobs in the county and population in the county. And so there really is this direct connection between the size and scale and type of farming operation you have, and the actual health of that local community, and what economic vibrancy looks like. And so we're really looking at all of those aspects when we talk about regenerative agriculture. And then I guess, human scale. You know, we don't have a hard bright line on like, what exactly that is, but it's really the idea that this is a farm that's being run by the people who are on the farm. And this isn't an operation where you've got a landlord who owns, you know, 100,000 acres across a couple of states trying to incorporate one practice as greenwashing. It's not, you know, the commodity production monoculture that you see. It's really people who are farmers, farming their land, is where our focus is.
Jim:So what's your reaction to that, Eric? I mean, it strikes me that that a large percentage of the folks that you might work with or that are farming in Hawaii would fall into those categories. But what's your take on it, Eric?
Eric Bowman:I agree with that sentiment, Jim. You know, just on a personal note, I grew up in what was agricultural part of Virginia, and lived there for 20 years. And then I moved to Washington State where I lived and worked for 20 years primarily in the rural rural areas, and I interacted a little bit with agriculture in Oregon and Washington. And during that time, I, about 10 years ago, I started working here, and now I've lived in Hawaii for about four years. So what I what I see the similarities. Agriculture in Hawaii, feels like a timber town in the Pacific Northwest that's closed, you know, and I live where I live on the Hamakua coast, we've lost about 10% of our population per decade since the 70s. And I've seen these towns in Eastern Washington, they're basically just hollowed out by by consolidation, and mechanization, so kind of what, kind of kind of what Ryan's talking about. What has happened in agriculture, in general is the middle is gone. We have like the super struggling small landowners, and then there's these like, like a mega dairy that's owned by investors, and there's 80,000 cows, and it's a nightmare for the environment for the workers and for the animals. And so I appreciate what the that that there's a pool of capital that's focusing on this. I mean, are, at the risk of maybe taking us a little too far, you can cut this out later if you want, Jim, but I mean, our ability to survive on this planet as a species is going to depend on what we do with agriculture. And a lot of what we do in agriculture is going to depend on the economics of it. And so, you know, maybe a little more for Ryan's benefit, is you know, a lot of people here know this, but it isn't lost on me when I think about agriculture in other parts of the world is it's like we're far from markets, inputs are expensive. The tropical products that we produce, we're competing with, you know, underdeveloped companies, countries like Vietnam and Cambodia or wherever else they would grow pineapple and sugarcane. And the way it's like, you know, it's very unique in terms of its relationship to the, to the to the American economy. And I final my final comment, I feel like I'm rambling a little bit here, where I see farmers being successful here is similar to where I see farmers being successful in Washington, Washington and Oregon. I talked to a rancher 1000s of acres, family owned cattle, wheat, timber, and he's, they had a, a cabin on a hill that overlooked their valleys with a very picturesque up, up kind of will allow that kind of, you know, kind of like the Blue Hills up towards Idaho. And you they would, so they would do bed and breakfasts and they would host weddings. And then he said the the thing that made them profitable, because you know, a lot of ranching is lifestyle, but the thing that made them profitable was they would fill up a couple tractor trailers with firewood, drive it into Portland, Oregon. And it's just like, my god, you have that asset pretty much debt free inherited, and like it takes that many business activities to become viable. It's like we're I mean, the food systemʻs under real strain. So that's what I see farmers here. The ones that are successful have like a rental property, they're hosting a bed breakfast, they're doing farm tours, they're doing tastings, they're doing an event. They're they're doing something that's beyond just, you know, for us, it's you know, with flowers, and not cattle, but calves we ship, we ship a lot of calves to Washington and Oregon.
Jim:So I guess here's a scenario I'm just gonna throw out, I'll just I'll talk from being someone that that lives and farms on a piece of property that used to be sugarcane, it was over over-farmed with sugar cane for many years, I started by bringing in cattle to help help with the soil, I have horses grazing as well to keep the grass down as well as to help improve the soil. I have soil that I'm trying to that I'm amending. I created compost piles, I'm doing all that. I have chickens, I have a multitude of crops I'm growing. So it sounds like if I need a loan, I might be a good candidate for for what you folks target for human scale regenerative farms?
Ryan Anderson:Yeah, I'm I'm going to assume that you have more than three years of experience as an operator. And, you know, I think that your commitment to sort of repairing that property is really admirable. And the way that you're going about, sort of in stages, restoring what should be there and undoing that damage, I think is really smart. We would really want to take a look at, you know, do you have the experience and background? And do you have the technical support that you might need to do that transition? I think probably yes, you're a pretty good farmer. And then the other thing is, we really want to understand, you know, what's your business strategy. Debt is something that has to be repaid. And so it's not the right tool for every funding need that you might have. It's really going to be best used when you can see how taking that debt and acquiring that funding can really change the financial picture for your business. And so making sure that those funds are being targeted at activities that can improve your bottom line, improve that cash flow, is really where debt is going to be the most useful answer and the right tool for you. So we would just want to go through, you know, what are your plans for the future? You've got cattle, you've got horses, you're improving the quality of this soil, what's the next year look like? What's the year after that? Are you going to, you know, by repairing this property, be able to support more animals on this? Is your income from selling the cattle going to go up? Things like that.
Jim:Great. So it's, again, you partner with ag producer as kind of a business partner. And it sounds like there's a focus on return on investment really. So, which is, in my mind is, it feels unique. But you know, Eric, maybe that happens all the time. I'm used to providing balance sheets and income statements and cash flows to finance or to lenders, but I've not really heard that question or that concept of working with me, as the recipient, to determine what the return on investment is for that loan.
Ryan Anderson:We're, we take a different approach than most people. Certainly, we can look at your balance sheet and your past performance. And the sort of like, bottom line, easiest way of diligencing that lending is to simply look and say you've already got the cash flow. So even if this investment in your business accomplishes zero additional revenue, you're already financially stable enough, and you've got the money to be able to pay us back, and that is a approach to lending that a lot of banks, the USDA, Farm Credit, are really relying on. The problem is if you're a new operator, if you're still building a business, if you didn't inherit that family farm, there are a lot of challenges to be able to do that. In order to have cash flow, you need the investment in, right? And so we really want to look at sort of not only what that past performance is, but can we work with you and develop a relationship and get comfortable with the idea that, with this loan, you'll be able to do the things that are going to drive future revenue growth, and that's where those loan payments are going to come from.
Jim:That's great. That's helpful. Perhaps if you could share some funding use cases for farming, ranching, agritourism, land acquisition, things like that might be useful for for us to hear that spectrum of of scenarios that youʻve funded.
Ryan Anderson:Yeah, yeah. Well, I just mentioned sort of earlier the loan that we just closed a month or two ago for $1.4 million. That was for agritourism in the state of Vermont, working with a really fantastic company studio Hill. And Jesse and Caroline inherited this four generation family property, but the soil quality had been pretty degraded. And they started regenerative grazing of sheep on the property to improve that soil quality, and, you know, make make this improvement to the family asset and this heritage that they've
Jim:And I think, yeah, sorry to interrupt. I think some of these had. But, you know, financially in order to be able to continue owning all of this land, they're not wealthy individuals, you know, well land rich cash poor, they needed to be able to find a way to keep that in the family, and not have to sell it off. And so they've really built out not only the sheep grazing, and that side of the business, but also aggregators. And so through Steward, they were able to access the financing to make improvements to some of their initial properties, to buy adjacent properties, and turn those into Airbnb stays is where you can find Studio Hill. And it's a really great example of how agritourism can be such an important component of regenerative agriculture. I think we don't talk enough about the fact that, you know, 90% of farms in the United States are relying on off farm income in order to pay the bills. Farming is a difficult business, you're not making a ton of money. And there are a lot of ways the economics of agriculture in this country are really messed up and have become unfavorable to small independent farmers. And agritourism is this great way to bring in that outside income, and help you preserve that land and conserve that environmental quality. You know, Studio Hill, they're actually expanding the acreage that they have, they're expanding the size of their sheep herd, in part because they have this agritourism to be able to support that. And it's a really great compliment, you know, people love to stay on farm in that Airbnb, and you'll look out and it's not a 7-11 across the street, you know. It's not some suburban development across the street. It's the beautiful rolling hills of Vermont covered in these beautiful sheep. So, you know, that's on the sort of large side, we also do a lot of work with smaller scale, sort of diversified vegetable operations. We also relatively recently, were lucky enough to work with the Williams Vegetable Farm down in Louisiana. And that's a really fantastic story of Robert and Gwendolen, they used to be in farming. They left, they were plaintiffs in the Pickford cases, their experiences with discrimination at USDA really drove them out of agriculture for a while, and they wanted to get back into farming. And so with financing from Steward, they purchased property from members of their family, five acres. It used to be conventional soy production, they're turning it into community focused, regenerative vegetable production in that community to actually serve their friends and family and neighbors. And it's just been such a great opportunity for us, to provide support to them, and to be able to work with them on that transition, right, and be able to take that land out of conventional production and do something better with it that's going to be healthier for that environment, and serve their community a lot better. stories are available on your website as well. Yes, yes. Are they my right?
Ryan Anderson:You can see on our website, which is actually maybe a great transition. One of the things, the way that Steward provides this financing, we're doing what are called participated loans. And so for all of these projects, you can go to our website, and if you look through previously funded, you can see, you know, pictures of the producers and the description of that opportunity. And what, one of the things that makes us unique, we're doing a lot of things differently, but one of the things is, each of these loans are available for people in our network, in the farms network, to be able to actually provide that capital and lend into it. And so it's not a it's not a gift. It's not, you know, a sort of online crowd source kind of free money activity. But people who are in our network, now we've got, you know, 1000s of lenders that participate, friends and family of the farmers can come in and actually provide that loan, and they're the ones to get that interest. So when we do a loan, if that's a 7% interest rate on the lending to the farm, that 7% interest doesn't come to Steward, it goes to the friends and family and the individual people who actually made that financing possible.
Jim:7% Is that a pretty typical percentage that you see?
Ryan Anderson:We're we're ranging anywhere from 5 to 10%, depending on, you know, a number of factors. But 6, 7% is pretty standard for us.
Jim:Can you share a little bit more maybe about Stewart's mission, how it was formed? Why I mean, this model seems to be very different from any that I've worked with, personally, and I think many folks are used to from lending institutions. Perhaps I'm just out of touch, but to me, it's pretty unique. And so just kind of curious how and why Steward was formed.
Ryan Anderson:Yeah, we, Steward was founded in 2016. And our founder, Dan Miller, he has just an amazing background in financing. And his family, you know, they, generations back, had been farming on the eastern shore of Maryland. And he, you know, after some time, really wanted to take what he knows about lending and financing and financial products, and put it to service for the values that he has as a person. And that was really supporting small farmers. And it is through conversations that he had with small scale farmers and chefs in the mid Atlantic region, that he really came to understand that there was this gap in what is available, right, if you're a small farmer starting out. If you're human scale farm, if you're doing practices that are regenerative, and outside that conventional ag model, those traditional lenders are not serving you well. It is much harder to get that loan from USDA, much harder to get that local bank to serve you if you're not buying chemicals and spraying them on the dirt. And so he really saw this opportunity to take that skill set and create this opportunity for regenerative agriculture.
Jim:I think it's great. But Eric, tell me if I'm, am I wrong in thinking that this is unique and and rare, or are you seeing more of these types of structures out there from others?
Eric Bowman:I think Steward definitely fills a unique role. I can't think actually of anything comparable in terms of what it's doing. You know, just a side note, I've recently looked into it for a small business development center presentation, just crowdfunding in general, they wanted me to speak about it, because we're very active on Kiva, which is similar in that it's a loan participation, except that it's capped at a very small amount. And they can't do more than you
Ryan Anderson:And that I mean, right, that really touches on it know, it's it's, it's pretty unique in terms of the the market that that they're serving, whereas I think Steward is much more scalable. And Kiva is adamant about not charging interest, which, which, which makes it the, you know, I'm a lender on Kiva participating, 25 bucks, 50 bucks, whatever. But I'm not going to put in $10,000. And I'm not going to expect Kiva to manage like collections if they're if there's collateral involved, for example. So it's really playing in a very different type of focus for, for where capital wants to be deployed. You know, just to caveat that, there has been a plethora of these crowdfunding websites that have been starting up in recent years because of some of the regulations that have been, have evolved about how just how do we get not accredited investors supporting the local economy? So I think they might be part of a bigger trend, but definitely, I can't think of anything comparable, frankly. And I can't think I mean, there's lenders that are interested in lending into regenerative ag like they would like to do it. I think that's been a focus for a lot of the people who want to see agriculture get developed in the state, but just you know, speaking for my one experience of them with digestive two experiences, I know somebody who, who got something alone for them in Oregon, but both of those borrowers probably would not have received access to debt financing elsewhere. One nuance that I want to add to Ryan, I mean, there's no local banks here play in agriculture, we have a very conservative banking sector here. And it's, it's pretty much a non starter. I mean, they'll lend to a farmer who also has off farm income and is maybe doing well and might need a mortgage. Like something right there that you don't have that commodity production in the like credit card, line of credit, you know, from a consumer financial perspective, they're there, whatever, you're just another customer, but, you know, they're not very active in business lending, in general, and then they tend to be a little bit more conservative than what you might expect from that sector, from like, for example, Bank of America, or like Umpqa Bank, you know, so these banks that are a little bit more dynamic in terms of getting out there. And I'm not trying to disparage the banking sector here, I think there's a lot of good people involved, I think there's just there's, we've had a lot of bad years in agriculture, you know, we get a new pest a month, we're in hurricane. And I think everybody has seen the failures, and I think they're just they've been burned so many times that they're not eager to get out there and, and play in that in that sector, just to be frank. And we don't have traditional commodities, to exactly your point. I mean, I was just sittinʻ here nodinʻ my head when you're talking about carrots. And we barely even have that level of perspective, when. Even even carrots are really a common specialty. So like corn, soy, wheat, you know, there's a, there's a bank in a small town in the Midwest that knows exactly how much a bushel of wheat will, or corn or soy, can be sold for and how many bushels you can get per acre, in what part of the county, and there's, we're just, we're a little teeny volcano out in the middle of Pacific with a desert and rainforest on it, and you drive a quarter of a mile in one direction, you're in different climate zone. So there just isn't that consistency to agriculture, like you would find. state. And traditional agricultural financing is designed to facilitate commodity production. So if you don't have all of those commodity producers, there, the banks don't think that there's anybody for them to serve. And the tools that they have at their disposal for agriculture are a mismatch for what's actually happening on the island. And sort of where you want to be having that impact.
Eric Bowman:I think finance has gotten more and more mechanized, standardized. And, you know, I had a, I worked many years with somebody who was from, I don't want to say which one, a small town in eastern Washington. And you know, it was like, the wheat farmers would have cousins working in the bank, and they call up and need some money. And all "I know, oh, my God, you, of course, let's do this, bring in your numbers, and we'll take a look at it." And you know, her bank was merged something like five times, I can't think it was like five times in two years. And it got to the point where, you know, they were calling in notes and farmers would come in and their boots, and overalls and they just pointed at phone and be like, You got to call Chicago to find out what we can do for you. They literally had suicides on their staff, because they were they were they were there was just so excruciating for these banks, you know. Banking, banking wasn't like this 20 years ago, 40 years ago, like it's changed. And I feel like the need for what the work that I do and what Ryan does, it's, it's it's a reaction to that, that that same consolidation that's occurred in, in the in agriculture, where it's become not human scale. I would say financing is very much become not human scale. So that you know, a lot of the lenders that are interested in ag, are willing to be in that relationship, hear your story, and then realize that they're going to be they're going to be paying attention to you over over time.
Jim:Yeah, yeah. Interesting, parallel there, with how agriculture has been morphing, is
Eric Bowman:Itʻs not a concerted effort Jim. It's not a coincidence. Yes. Right.
Jim:Exactly. One thing that we didn't touch on Ryan is, how does it How does steward stay in business and make its money. Do you have a, like a structure to your lending? Because it sounds like I could invest or others could invest in in some of the loans that you're giving out and, and get some of the revenue from that. But is there a percentage that's held back by Steward, I mean, I'm now I'm concerned that I want to make sure Steward stays around for a long time. So
Ryan Anderson:We always stay around for a long time. Now. So our funding in every loan, there is what's called an origination fee. And you'll see this, you know, whether it's Ag America or Bank of America, or any lender, there's always an origination fee. We're charging a 3% origination fee. And that's the money that actually stays with Steward and pays for us to provide the services and do the work of underwriting it. We're not taking any of that ongoing interest rate every month that's charged. That's going all to the lenders who put up that capital. And so we think it's a good model. We think it's a really great way to you know, incentivize the lenders to participate in that. Uh, make it easy for our borrowers to also sort of talk to their community about this, right? Like, you can go to your grandma or to that guy at the church and say, hey, you know, I'm doing a Kickstarter, and they'll give you a couple 100 bucks, maybe. But if you go to them and say, Look, this is a loan, and I'm going to be paying you back over time, and you're going to be getting interest on that, as I do that, then suddenly, your friends and family and that community is going to put together even more resources, even more money, to be able to support your business. And so you can really leverage those relationships, to have a successful campaign and get that investment that you need to grow your business.
Jim:And do you folks encourage that, or at some level require that? Do require that involvement. I know some of the micro loans we've talked to Eric about, there's, I think there's a requirement that you have a certain amount, from friends and family that, initially, that before you get a loan, the
Ryan Anderson:Yes, we were require that participation. We larger amount. think it is a really great way of gauging that level of community support for your business. We, you know, typically target 20%. If we're working with a farmer, who's coming from under resourced and underserved community, we're happy to sort of adjust that requirement. The really the key thing we're looking for, is pretty broad based participation, right? If you're a farm, and your primary sales are the farmers market and the CSA, you really rely on that public to provide the revenue that's going to make your business succeed. So if you can show us a lot of people participating in that fundraising campaign and providing you these loans, we know that you have that customer base and that support that you're going to need to grow and succeed into the future. And then it, right, then it really is like, you have this relationship with your local community who is supporting you, and it changes the way everyone thinks about that obligation.
Jim:So very much like a CSA as you describe it, right?
Eric Bowman:And off of that, Ryan is, you know, just speaking from my perspective of Kiva, there's a brand engagement element, and that's a transactional way of putting it, but I mean, they're, you know, I put in $25 into, you know, a diversified vegetable farm. I think of that silly little 25 bucks every time I grabbed their product, and I kind of grabbed their product, because I want them to pay me back that you know, 60 cents a month payment or whatever it was that participate in the loan. But you know, what I see with a lot of the Kiva applicants is they're get very nervous. Like, "I've never asked anybody for money before I feel so much shame." And, you know, my experience when you ask people for money is they have one of two reactions. One is like, "Wow, thank, Wow, I can't right now, but thank you for thinking about me. I'm honored that you would come to me for that. Whoo." And then the other reaction is "Okay, yeah, I'm looking for deals, I need a place to put it. I know you and I like you and I trust you, and then let's go." And that you guys are offering market rate on debt, both for the borrower and the lender, not something that's concessionary means that, you know, if there's a, if I walked into a restaurant that I cared about, and they were like, you know, invest in us or whatever, and I'd 1000 bucks, and then I was gonna get 7% on that, you know, that that might be an
Ryan Anderson:Yeah. And we, you know, certainly it is something attractive thing. new for people to ask for money. And there can be a little bit of hesitation, and just unfamiliarity with doing that kind of work. You know, we have a ton of resources for all of our borrowers to do that, we've got a guide that we've written up to really walk them through how to do that. We have someone on staff whose job is to just walk people through that. Provide them that support, you know, we'll have weekly calls with people that they want to really see how that's going and make sure that they have the resources and the confidence that they need to really make those asks and do that kind of work. And we've never had a farm that simply failed to, you know, hit some threshold in that fundraising and wasn't able to raise what they needed in order to move forward.
Jim:That's great. Good to know. In closing, as I mentioned that the at the outset of the discussion, finances, funding, cash flow, it's a big stressor for ag producers in all the islands, and probably in the top five, if not even higher, perhaps even the number one or number two stressor. So, and maybe start with who you Eric, any, any closing thoughts related to, to how to talk to our ag producers, to perhaps help with some of that stress that they're feeling?
Eric Bowman:You know, what I leave people with is this this comment that helps, you know, helps out there with the Small Business Development Center, the call center, lender, to borrow, you know, the borrowing from Steward is that, you know, where I see people really struggling with finances is they do it in isolation. And they, you know, they've done research, I can say the study if you want better they they give farmers in India basic math problems during drought when they can't make ends meet. And then during time when they're, you know, during the monsoon where there's a lot of they're producing all their rice or whatever. And, like literally cognitive ability declines under stress. And so the a lot of the financial strains that I see with farmers are, it's the same stuff you read about in the news, it's their kidsʻ college debt, it's inflation. Inputs doubled for a lot of the farms that I'm working with, like recently. And it's, you know, medical bills. And it's so if they need support with like planning their business or budgeting between CTAHR, the support organizations, to just reach out. I guess that would be the that would be the comment I would have is to not, you're not going to solve it on your own at three in the morning.
Jim:We thank Eric and Ryan for sharing details about funding and financial supports that may be available to those that are focused on regenerative agriculture in Hawaii. In our SOW surveys of over 400 ag producers in Hawaii, financial worries were high on their list, and so we hope these resources will prove useful in addressing that stressor.
Ryan Anderson:Just to circle back about sort of collaborative lending. That's always really great for folks to reach out and be working together. One of the things we'd love to see is if our applicants and our borrowers are working with organizations like CTAHR and other sort of technical service providers to get that assistance and business advising and working that out. The the economics of agriculture are a lot crazier and more difficult than they used to be. Running a small farm is not just about growing the produce anymore. It's also the marketing and the sales and social media. And they're all of these additional aspects. And it's, you know, hard if not impossible, for any one person to sort of be on top of all of those pieces. And so knowing that you're working with other organizations to get that support, just having that mentorship or someone to bounce ideas off of is really fantastic. And we look forward to continuing to work with both of you. And with all of the farmers in Hawaii. Like it's a complete shame that traditional financing is ignoring the need there on the island and we would love to partner with so many of you to try to figure out how we can support the growth of those businesses.
Jim: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 he would like to share your story, please contact us. We welcome your voices and perspectives