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V O L . X X I V N O. V I I A P R I L 2 , 2 0 1 8 24 B A N K I N G / F I N A N C E F O C U S has declined," Senter says. " at can have a big impact on farmers. ey might do everything right in their business and produce a high-quality crop. But if the market is oversupplied, the price can go down to a level where they can't make a profi t." e dairy industry is going through a similar cycle. " ere's an increased amount of milk production nationally, so the price of milk is lower than necessary for many producers to generate a profi t," he says. "It's not that farmers are doing anything wrong. It's just more milk than the mar- ket is able to absorb. But you can't tell cows not to make milk." at unpredictability "makes it more important for farmers to work with a fi nancial institution that understands what they're dealing with," Senter says. Finance strategies Government and nonprofi t programs often step in where conventional banks might hesitate, says Jessica Nixon, director of market development with the state's Agricultural Resource Development Division. " ere are certain risk factors, so traditional banks sometimes have more diffi culty in terms of work- ing with farmers," says Nixon. "Our stance has always been to provide a venue for farms so they can access the capital they need to keep operating." USDA's Farm Service Agency, for example, is a lender of fi rst opportunity, helping producers who can't get loans from traditional lenders, says Maine Executive Director David Lavway. FSA has many loan programs to purchase land, livestock and equipment, construct buildings and make farm improvements. "If the funds under our loan pro- grams weren't available, these producers' options would be limited," Lavway says. "A state like Maine has a diverse agricultural base and diverse producer base," Lavway continues. "You have to have some idea of what agriculture is all about, and the risk that's connected with diff erent crops." " ere's no diff erence between a million bucks from Farm Credit versus a bank," Hallowell adds. "We price our loans in the market, which means we're in the same ballpark as our competitors. So we sell service and knowledge. Because we're limited in scope, the advantage is that we're good at what we do." Many farmers don't qualify for con- ventional loans or don't have enough capital saved to make a large down payment, says Benneth Phelps, direc- tor of farm services at Dirt Capital Partners, a Hudson, N.Y. East Forty Farm and Dairy in Waldoboro is a typical client. When Allison Lakin and Neal Foley approached Dirt Capital about acquir- ing 40 acres to relocate their cheese- making and sawmill businesses and boost its livestock operation, the asking price was too high. With negotiations by Dirt Capital, and the sale of an agricul- tural conservation easement to Maine Farmland Trust, the acquisition price was reduced from $450,000 to $300,000. e property was acquired by Dirt Capital, and Lakin and Foley received a nine-year lease with an option to buy. "What worked best was to get us into a situation where we could make a shift from my being limited in produc- tion size to being able to boost produc- tion, gain customers, then have the rest of the plan — raising pigs, having farm space and an education program — that would contribute to the income to sup- port the purchase from Dirt Capital a few years down the line," says Lakin. Dirt Capital off ered a fl exible payback structure, syncing payment increases with income growth. Flexibility might include extended payback timeframes, loan modifi ca- tions and interest-only payments. "We try to match up when their high- est amount of cash fl ow comes in with the loan payments," says Jon Nicholson, a senior vice president at First National Bank. "We might require interest-only payments during the low time. If they can't pay, we would work with them to modify the loan payments. And we address all the risks that could happen during the underwriting of the loans." Hallowell of Farm Credit East may sum it up best. "I tell people that if we only lent to customers who have made money every year for the last 20 years, we wouldn't have any customers at all," he says. L S , M a i n e b i z s e n i o r w r i t e r , c a n b e r e a c h e d a t @ . » C O N T I N U E D F RO M P R E V I O U S PA G E Maine lawyers. Maine clients. Maine values. Por tland / Kennebunk • 207-775-7271 • 1-800-756-1166 • jbgh.com At Jensen Baird, our commitment is to you. We know what our clients need, because we know Maine. Our lawyers understand the unique challenges of living and doing business here. We aren't part of a huge national firm, we're part of the community. And we've been that way for over 60 years. We try to match up We try to match up We try to match up We try to match up We try to match up We try to match up We try to match up We try to match up We try to match up We try to match up We try to match up We try to match up We try to match up We try to match up when their highest when their highest when their highest when their highest when their highest when their highest when their highest when their highest when their highest when their highest when their highest when their highest when their highest amount of cash flow comes in with the loan payments. — Jon Nicholson First National Bank Construction Loans Rehab & Renovation Loans Land Development & Subdivision Loans Short Term Bridge Loans Where others see buildings, we see communities. Where others see numbers, we see people. Where others see problems, we see solutions. Maine Capital Group provides single-source lending and strategic advisory services for small to mid-sized financing opportunities in the residential and commercial real estate markets. www.mainecapitalgroup.com Contact Shawn Lyden: slyden@mainecapitalgroup.com / 207-513-1059

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