BANGOR, Maine (12/29/14)--A credit union may soon be established in Maine for the first time in a quarter-century and, should it come to fruition, not only will it provide financing to small farmers and the local food economy, it may help other Maine credit unions do so as well.
The prospective credit union, called the Maine Harvest Credit Project--as it has yet to receive the necessary go-ahead from state regulators to call itself a credit union--is spearheaded by two gentlemen steeped in the world of finance and who are greatly interested in supporting the local organic food movement.
Several years back, that common interest propelled Scott Budde, formerly a manager of social and community investment strategies for TIAA-CREF, and Sam May, who comes from an extensive background in investment banking and equity research, to begin investigating how they could provide this specialized financing to small farmers.
A little more than a year ago, the two joined forces and set out to form a credit union that focused on the relocalization of agriculture in Maine.
The new team carried out extensive research on the small farming industry in the state, and they learned that despite the rapid growth Maine was seeing in small farming--agricultural sales in Maine climbed 24% between 2007 and 2012, and the number of young farmers in the state continues to rise--there was still an apparent lack of financing options available to farmers and business owners.
Some farmers told Budde and May that they were nearly laughed out of banks when they approached them for financing for their farming operations. Others said government programs had too many restrictions.
"If you're in this sector or you want to get into this sector and be part of that growth, which is crucial, you don't have that many financing options as you would if you were doing another type of small business," Budde told
Ultimately, both Budde and May felt that a credit union was the most well-equipped financial institution to serve the industry.
"(I thought) a credit union structure or organization really could play a significant role," May told
. "If we're relocalizing agriculture, we're going to have to relocalize the infrastructure for agriculture, and that's going to require finance."
Added Budde: "What seemed to be necessary was a need for some larger-scale and longer-term financing than loan funds were capable of doing, and that's what kind of confirmed that a credit union structure would work--because we could tap longer-term deposits."
With the help of credit unions in Maine, which Budde and May say have been very encouraging as they develop the cooperative financial institution, the initiative's leaders are nearing the point at which they can formally apply for a state charter (
The Bangor Daily News
Should they gain approval, which also will require them to secure grant funding to support the application, the organization's two leaders hope to provide small farmers with products such as mortgages that range between $100,000 and $500,000, equipment loans between $5,000 and $50,000, and seasonal loans of the same amounts.
This would open opportunities for small farmers and small food businesses to apply for loans to acquire land, or to acquire used equipment that's almost nearly impossible to finance right now.
Budde says that they've received much interest from the industry in Maine Harvest and they hope to be up and running in roughly two years.
But there's more to Budde and May's mission than simply running a successful credit union and supporting the local small farm industry in Maine.
It's the duo's goal, after the credit union industry has helped lift them off the ground, to return the favor and become a resource to credit unions throughout the state that are interested in providing this type of financing to members.
Many credit unions in Maine simply don't have the capability to provide this type of financing to farmers in their communities, and Budde and May believe they can bridge that gap.
"If you have a community field of membership and you draw a circle around your branches and you see who's in that food economy sector, and you find a couple of food businesses and a half-dozen farms, even if they're growing rapidly, it's still not enough to justify developing the expertise to do smart lending in the sector," Budde said. "It's hard for them to find enough scale within their footprint to develop the expertise to make it worth it."
John Murphy, president/CEO of the Maine Credit Union League--to which Budde and May recently gave a presentation about their operation--says the idea for the credit union in general, and this idea of becoming a resource to other credit unions that want to get involved in financing this industry, is certainly something the league supports.
"What they're saying, if you have a credit union that doesn't have the experience maybe in that kind of lending, then they would want to be a resource because it would help the organic farmers across the state," Murphy told
. "I think that's a great opportunity for credit unions to help each other and to work together to serve a need."
"They're very thorough, they're serious about this, they've put a lot of work into this and they continue to do so," Murphy added. "We support any group that does their homework, and that is looking to expand credit union service to consumers."