Organic Transition Loan
Made for farmers transitioning acres to organic.
1) You only pay when you’re profitable.
2) You don’t owe anything for 36 months.
3) The loan comes with on-the-ground farm planning and marketing.
This is for Farmers who are:
- Expanding their organic acreage in 2020
- In the midst of transitioning acreage to organic
A broken system of this magnitude can’t be fixed, only replaced
To create a new system that works for people, not corporations, we need an entirely new type of finance. We’ve created the next generation of financing.
The Perennial Fund is finance that saddles up with the farmer and provides the all tools needed to succeed. Our success is entirely dependent on farmer success. We made sure that was a core design feature of this loan.
How does this work?
The Perennial Fund loans $50-200 per acre per year to the farmer for 3 years to transition to organic in exchange for a 5-25% gross profit share after the acreage is certified organic until 150% of the initial loan is returned.
The gross revenue share is based on a percentage above the regional average costs for that crop - similar to a net profit share without the need to track costs.
It’s debt with terms that put the farmers best interest first and for most - tying success and risk of every party to one another. The per acre loan amount is determined during the farm planning process by the overall capital needed to facilitate a successful organic transition. The investment can be used to cover operational costs, equipment and infrastructure. Farmers do not pay back the fund until they are making net profits.
What’s the Interest Rate?
The maximum amount owed is 150% of what was initialed loaned over the 3 year transition. If you were loaned $100/acre for 3 years ($300 total), the amount owed would be $450 within the 7 following years.
Payback over 8 years is equivalent to a 5.20% interest rate.
Payback over 10 years is equivalent to a 4.14% interest rate.
We target all loans to be paid back within 8 total years including the transition but build in 2 seasons of climatic buffer, 10 total years.
Skin-in-the-Game & Debt Forgiveness.
Changing a farm enterprise, crops and practices is not easy. The PF is structured for us to have a long-term incentive to ensure farmer success: we only get paid once the certified organic farm is operating profitably. If we can’t help you return 150% the initial investment over 10 years, the debt will be forgiven. Yes, this is radical. The loans issued to Projects are securitized with the farm equipment and crop. The PF will only be entitled to the security if the project does one of the following:
Sells, abandons, or is unable to continue owning or leasing the project property before the end of the 10 year Fund contract Term.
If the Project is reverted back to non-Certified Organic crops after the 36 month transition phase and before the end of the 10 year loan contract.
What’s Included with the Transitional Loan?
Mad Agriculture helps farmers overcome the barriers to transition using the above System of Change that begins with helping farmers design their way out of the industrial system using Carbon Farm Planning to transition to regenerative and organic agriculture. Yes. All of these services are included for FREE with every single Perennial Fund organic transition loan that is issued.
We activate Carbon Farm Plans with three catalytic levers:
Lever 1: Access to both free and affordable capital to finance the transition to organic agriculture.
Transitional Loan to expand organic acreage
Access to free NRCS EQIP funding to cost-share conservation practice adoption
Lever 2: Technical assistance and training to de-risk transition with know-how and community support.
Individualized carbon farm and business plan
Organic transition plan
Free (and optional) software through Granular for 5 years
Lever 3: Secure market off-take for transitional and organic crops, as well as soil carbon credits.
Transitional and organic crop market assistance in setting up long term contract agreements with our network of buying partners, like Pipeline Foods
Soil analysis, specifically soil carbon quantification with Quick Carbon
Sale of carbon removal certificates through Nori. We help with setting up your account, managing the data, and getting you a fair price for the value of the CO2 you sequester in your soils.