How To Secure a Farm Loan for your Hemp Business

January 26, 2021 / Blog

2020 was a wild year for everyone. But for real estate professionals in Vermont, it was their busiest year EVER.  As the pandemic gripped densely populated areas, people fled to Vermont by the thousands, bringing their high-paying city salaries to our rural state.  Houses were purchased sight-unseen for over asking price, and video tours became the new norm.

As a small Vermont farming business, we had decided that we needed to stop:

• leasing acreage
• wasting money on expensive apartment rent
• commuting to the fields everyday
• being afraid to follow our dreams & set roots

After outlining our wish list, we started our search to find a property that could meet our personal and business needs. Scouring Zillow, Craigslist, Farming Forums and any real estate listing we could get our hands on, we slowly determined that we had to narrow our focus to Central Vermont. This area would give us access to the fields we have been leasing for the last 3 years, so we could have a year of transition and preparation.  We would need to be near family to help with their needs and the ever-demanding Sugaring (Maple Syrup) operation. We found a spot that seemed like it would meet our needs and be in an “affordable” price range.  Reaching out to a Real Estate Agent through Zillow became an incredibly impersonal event as we toured a few homes and realized that the Agent did not have our interests in mind.  Luckily, we had picked a property that we fell in love with and jotted down the Seller agent’s information.

Enter the magical Igor Polenov, real estate extraordinaire

The seller of the house was in the process of changing agencies although she had a good history with Igor (he had helped her buy the property). We went back for a second tour of the property with Igor by our side and fell even deeper in love with the land, the house and the location.  We negotiated on price and had our offer accepted (under asking!).  The property has a rather long driveway which is not municipally maintained that had deterred several potential buyers over the summer.

Financing our dream property started off smoothly, but little did we know the ride we were in for…

When we began working on financing the property it became evident that a “conventional mortgage” probably wouldn’t be feasible.  There were a number of factors that made our Credit Union, and several other local banks deny our applications.

1. The property is 100% off-grid
2. Business and Residential on same lot
3. Lack of Self-Employed income history (5 years needed) we only had 2.5 (1 of which we were working other jobs too)
4. Farmers

Despite having excellent credit, a thriving small business and great references, banks wouldn’t even consider us for another two and a half years.

Farm Service Agency Woes

We turned to our local Farm Service Agency (a branch of the USDA) that gives loans for farm ownership & operating expenses.  We chatted at length with a REAL LOCAL HUMAN, who thought that we could be a good fit for the FSA’s program.  The Farm Service Agency has a massive workload (especially amid the pandemic) and is historically under staffed.  We filed form after form and submitted all sorts of records, tax returns, soil samples for the property, a new 20-page business plan… if you could think of putting it on paper, we did, in triplicate… emailed, mailed, notarized… whatever it took. Then we would wait, sometimes a week or more, with several gentle nudges to our very busy, overworked local agent.  He would ask for another form and we would get to work, only to wait again… After several months it looked like things were ready to go!

Obviously, we were getting antsy, as was the very patient seller of the property.  Our Local Agent phoned to let us know that he just needed final approval from the federal office but that he didn’t expect any issues.  Then we didn’t hear from him for 2 weeks… Despite emails, calls to the office, and left messages.  The dreaded phone call came one rainy morning “sorry, I guess federally we still can’t finance a hemp operation.  There is nothing I can do to help”

VEDA to the rescue

We were distraught, for months we had poured all of our energy into purchasing our Dream Farm.  While talking with a fellow farmer, he suggested we call the Vermont Economic Development Authority and discuss our business plan and aspirations with them.  VEDA quickly responded to us and asked that we forward all of our completed FSA paperwork to them for review.  With a couple tweaks and additional forms we were able to get them a mountain of data that same day.  After a financial review and an in-depth analysis of operation, liabilities and experience our VEDA agent presented our project to her supervisor.  Everything was tentatively approved quickly but because our operation revolved around Hemp & CBD it became a much more involved process.  The project needed stamps of approval from lawyers, the Board of Directors, and the CEO.

Somehow we were able to dot all of the i’s, cross all the t’s and have all our ducks in a row.  After months of paperwork, we were the first Hemp Farm in the state (and maybe the country) to receive a guaranteed commercial farm loan.  2 months later, we are still unpacking, and realizing that sometimes you have to move mountains to get what you really want. It is the effort of picking up and moving every stone that makes one realize their true desires.