New FBN pilot offers land loan rewards to farmers switching to regen ag practices

Farmers Business Network (FBN) has launched a pilot, the Regenerative Agriculture Financing (RAF) Land Loan program, to reward farmers financially for implementing regenerative agriculture practices.

Select farmers that employ water and soil health practices such as no-till and cover cropping, and that meet criteria outlined by the Gradable platform and the Environmental Defense Fund (EDF), will be able to access discount interest rates through the new program on newly financed land for seven years.

The project comes out of research done by EDF showing that borrowers and farmers would be willing to adopt some regen ag practices and provide data in exchange for a reduction in land financing interest rates, Dan English, GM of FBN Financial, tells AgFunderNews.

“Our mission at FBN is to help make farmers more profitable,” he adds. “As the sustainability landscape evolves, we want to help farmers make money off [regenerative agriculture] and not just have it be another requirement they need to comply with.”

If the pilot proves successful, it will be the start of “a much bigger initiative to reward farmers for taking these practices,” he says.

The Walton Family Foundation provided a $750,000 program-related-investment (PRI) loan and grant for the pilot.

“They’re always looking for ways to support programs like this, and they have a particular mission to support areas within the Mississippi River watershed,” says English. “And so some of the conversations grew out of that. We told them what we were doing, explained some of our history [in the region] and what the potential benefits would be. And it turned out to be a great fit.”

The Foundation’s capital will serve as the second lien on each loan.

‘An extra dollar saved can go a long way’

The RAF pilot will select around 20 farmers — based on a first-come-first-served basis, says English — to participate, and provide them with discounted interest rates ranging from 0.25% to 0.50% on newly financed land for seven years.

“Particularly this year with the ag economy, the extra dollar saved can go a long way for folks,” he adds. “As we think about ways we can save farmers money this year, [RAF] is certainly one.”

Selected participants will agree to implementing soil and water health practices including no-till or reduced till and cover cropping/winter cash crops; they must also satisfy annual environmental benchmarks and assessments.

Participants must also demonstrate “responsible fertilizer use” as laid out in criteria developed by EDF. Gradable, meanwhile, will assist farmers with data collection and verify program results.

“A lot of the folks that we talked to on the environmental side are excited about this because it really rewards early adopters and people who are [transitioning to regenerative agriculture] because they wanted to test things out, make their land sustainable before they were even getting paid for it,” says English.

At the same time, he notes that the new project will also reward existing regen ag practices done on newly financed land.

A ‘first of its kind’

FBN launched its regenerative ag fund in 2022 as a new credit facility to reward growers implementing sustainable farming practices. The RAF program is a first of its kind in the industry, says English, who adds that the magnitude of the discount for the real estate loan is bigger than it is on a regular FBN operating loan.

The aim of the pilot is to showcase the interest from farmers willing to go through the process, and build momentum quickly in order to offer the program to thousands of farmers in the future, he says.

“This is really designed to show that we can get good quality credit farmers in here. They’re going to be able to repay their loans. We’ll be able to administer the discount. This is how it will provide a framework for additional funding over time”