What work does Slow Money Maine’s loan program do?
Inspired by Woody Tasch’s book Slow Money, Slow Money Maine (SMM) formed in 2010 to fill a perceived gap in financing for farms and start-up food businesses and to encourage people to invest locally. The mission of SMM is to build a diverse network of individuals, philanthropists, businesses, nonprofit organizations, and government entities that are focused on investing in farms and fisheries and the ecosystems that sustain them as a means of growing our local food systems, economies, and communities statewide. Since 2010, SMM has catalyzed investments of grants, equity, loans and technical assistance totaling more than $15.4 million to Maine farms and the food businesses that source from them.
This performance measure will focus on SMM loans. Slow Money lending provides an opportunity for individuals to invest in local food businesses in the following ways:
Peer-to-Peer Lending - Individuals make direct loans to local food producers. The lender and the business decide the terms of the loan and use a simple promissory note to define the transaction. Generally, loans have ranged from $1,500 to $40,000 or more with varied terms, often in the 2-5% interest range with 1 to 5 years for repayment. The borrower pays back the individual directly.
Small Group Financial Support - Local community members pool funds to make direct loans to entrepreneurs through investment clubs. The No Small Potatoes Investment Club strengthens Maine’s local food economy by making small, low-interest loans to farms, fishermen, and the food producers they supply. The Maine Organic Lenders members come together to analyze lending opportunities as a group and individually provide make low-cost loans to farmers, food processors, and distributors that have businesses rooted in organic and sustainable practices. The borrower pays back the group directly. About 35 people belong to these two groups.
To introduce potential lenders to entrepreneurs, SMM staff organizes and hosts 5 to 6 gatherings annually. Attendees learn about the events via social media, SMM’s website, SMM’s 1,000+ email list, press, and word of mouth. The events provide an opportunity to meet entrepreneurs and learn about the mission and financial health of their businesses. Interested lenders reach out independently to the business owner after the event has taken place if they wish to explore investing in the business.
A small team of dedicated volunteers and one part-time staff person run and lead SMM with an operating budget that has grown to approximately $45,000 over its nine years of operation.
How well did the loan program do the work?
As of 2018, SMM has catalyzed 252 separate loans, resulting in more than $6 million in loan funding to food producers. The focus has been on supporting businesses that process and distribute grain, poultry, beef, and vegetables to help create new markets for Maine’s farmers. Consequently, $2.7 million of that total was lent to 13 infrastructure businesses, such as Maine Grains, that source from Maine farmers and sell to a wide customer base. Additionally, SMM lenders lent $1.6 million to farms, $693,000 to value-added food businesses, $63,000 to fisheries related businesses, and $860,000 to non-profit organizations.
SMM staff report a low default rate on loans made to farms. 2 of 42 farms defaulted on loans.
Loans to infrastructure businesses have had a higher default rate. Of the 13 infrastructure businesses that received loans, four closed their doors and defaulted on their loans.
Since 2010, the SMM leadership team has organized five to six gatherings each year to showcase the business activity and food system work of farms, food businesses, non-profits, and government agencies. The events attract between 40 to 120 attendees each.
A Slow Maine steering committee member has spearheaded the creation of Maine Harvest Credit Union, a federally chartered credit union that will make loans to farms and food businesses. Set to open in 2019, any one who deposits money in the Maine Harvest Credit Union will be helping finance Maine farms and food businesses.
Is anyone better off?
Slow Money Maine’s Peer Lending Program has positively impacted goal number II in the Maine Food Strategy Framework in the following ways:
Bolstering the local food economy - SMM’s Peer Lending Program has catalyzed more than $6 million in loans to local food producers. A survey of 12 businesses SMM has worked with closely found that these businesses created 142 jobs and had more than $13.4 million in sales in 2018.
Social Capital - Building long-lasting relationships between investors, advisors, and Maine food producers is the single biggest way that SMM supports those within its network.
Unmeasurable benefits - SMM’s small staff only tracks financing that it has directly catalyzed. It does not measure other activities such as technical assistance provided, the growth of businesses it has assisted, number of jobs created, etc. But it is clear that its work has resulted in numerous benefits:
SMM’s website provides the tools, such as a promissory note template, for lenders and borrowers to facilitate a financial relationship without direct intervention from a SMM representative.
While family and friends have always been a source of start-up capital for businesses, SMM has unleashed a new wave of direct lending by customers to farmers and food businesses outside of its network.
SMM has been the primary source of financing for several growing Maine food brands which then become eligible for more traditional financing.
SMM has helped sustain several of Maine’s key infrastructure businesses that require significant capital investment before becoming profitable.
The SMM innovation of forming investment clubs became a model for slow money groups around the country.