While there aren’t many alternative financing options available in Montana, new strategies are popping up around the country all the time and several are in development here in our state. A few models that exist here include:
- Pre-sales: Although sites like Kickstarter and Indiegogo became well-known as “free money” sites, we prefer to think of them as pre-sales because following up on donor rewards should be factored into business and financial plans. In addition, the Community Supported Agriculture model, which has been applied to everything from vegetables to fruit to coffee to dairy and beyond, offers great opportunities with the pre-sale model.
- Peer-to-peer lending: The Community Food & Agriculture Coalition became a Kiva trustee in 2016, enabling them to endorse 0% interest, zero-fee loans up to $10,000 to their members. More information on being endorsed by CFAC is available on their Kiva site.
- Peer-to-peer investing: In 2015, Montana passed a crowdfunding law making direct investment a bit easier and doable through sites like Crowdfunder (talk to an attorney before pursuing this path as there are quite a few things to consider and t’s to cross, etc.).
Other alternatives being developed in other areas of the country include:
- Loan Loss Reserve Funds: Developed via donations, these funds like the Farmer Reserve Fund in Washington can allow banks and other lenders to have the confidence and backup funds to offer lower-interest rate loans to higher-risk businesses.
- Loan Funds: New loan funds specific to agriculture are being developed in certain areas to offer an alternative to conventional lending. The most famous of these is The Carrot Project in Boston.
- Slow Money: Similar to traditional investing, but investors expect slower, lower returns than typical angel investors or venture capitalists. Slow Money investors may also be open to smaller investments.
- Purchase of land and conversion to organic: Some investment firms, such as Farmland LP, are starting to buy conventionally farmed land, convert it to organic, and resell it, making their returns off of the added value they gain when selling land at the higher prices that organic farmland can reap.
Of course, there are also non-financial strategies that can play a key role in your financing strategy. These might include sharing ownership of land or equipment, leasing equipment instead of buying it, or forming cooperatives or alliances to make purchases, aggregate and distribute products, or market products together. Each of these can positively benefit your bottom line although they certainly require thorough consideration and considerable planning.