Talks began on microenterprise lending and how the groups and North Coast could possibly collaborate to provide small loans to farmers. Those conversations led to the launch of the Farmer Reserve Fund, a new program that links the credit union, Washington State University Extension, Slow Money NorthWest, Viva Farms and other investors in the region.

Launched by Slow Money Northwest, the fund recently made its first loan with North Coast to strawberry farmer Santiago Lozano and a second loan to vegetable producer Nelida Martinez.

Slow Money connects investors interested in food and farming with food and farm businesses seeking investment.

The loans allow new farmers to purchase equipment and supplies and then repay the loan within a year. Charitable donations from two local investors were used to establish a reserve fund at North Coast in order to reduce risk for the credit union while leveraging its existing deposits, according to the program's organizers.

Viva Farms said it screens its student-farmer pool for the best potential financing candidates.

The farmers also receive technical and entrepreneurial assistance from WSU Extension's Cultivating Success program.

Belcoe is ecstatic on how the effort came together.

“This is fun stuff for us. We're trying to assume a leadership role in community,” Belcoe said. “Our board has come up with a mission to help build strong communities and people of low income. This is right down our strike zone.”

Since the fund launched a few weeks ago, two loans totaling $7,000 have been dispersed, Belcoe said. To protect against losses, the investors provided North Coast with $5,000, which the credit union will leverage out to $25,000 against that pledge.

“This gives us a healthy reserve pool against losses,” Belcoe explained. “If we find losses are higher than that, we can ask for a bigger pool.” 

Given the size of the micro loans and the borrowers, who are required to be trained by Viva Farms, Belcoe is not so much worried about losses. Because the farmers have to make purchases before their crops come in, loan repayment will typically start after the fruits and vegetables have been harvested and sold. Belcoe said the loan would be similar to a balloon loan.

“It's not going to make money for the credit union, but it will have an impact on someone's life,” Belcoe said.

The Farmer Reserve Fund is the first piece of Slow Money's food and farm microfinance effort as the organization works to make it easier for local agriculture producers to grow their businesses, said Japhet Koteen, project manager for the Mount Vernon, Wash.-based group that connects investors interested in food and farming with food and farm businesses seeking investment.

“They're not a lot of banks that want to lend to farmers who are in this small start-up stage,” Koteen said. “We wanted to build on existing infrastructure in the community and deliver services efficiently by building relationships, rather than reinventing the wheel. The reserve fund structure through North Coast is a perfect match.”

Koteen said the credit union's loan-loss reserve is now 20% of its portfolio, a buffer that provides even more protection against risk.

New farmers like Lozano will have access to the capital they need to expand, Koteen pointed out. In 2011, he started with three acres. This year, Lozano will have 10 acres and the funds needed to hire more people to help tend his strawberry farm.

“It is very difficult for new growers to access credit,” Lozano said. “I will reserve some of my line of credit to cover any emergencies that come up. The rest I will use to pay my harvest crew before I get paid for sales.”

Martinez said she farms three acres at Viva Farms and leases another two acres elsewhere. She sells more than 70 varieties of vegetables at the Mount Vernon Farmers Market and makes fresh tortillas and Oaxacan style tacos stuffed with queso fresco, squash blossoms and other vegetables she grows on her farms.”