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Tuesday March 13, 2007 Edition
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Farm Lending Is A Specialized Field Vermont Offers Many Options

Tuesday March 13, 2007

By Ed Barna

    People in farming country know that it takes more than farms, and one of the key supports is access to credit.

    Not many banks feel capable of evaluating a farm loan application and deciding what is or isn't a good risk. Around and about the Champlain Valley, the National Bank of Middlebury, the First National Bank of Orwell, and the Chittenden Bank have some ag loans in their portfolios.

    But the one that farmers know for its long history of ag lending is the Lyndonville Savings Bank & Trust Company, aka the Lyndonville Savings Bank or just LyndonBank.

     Farming is one of the few  sustainable businesses in the Vermont. Franklin,Orleans and Addison Counties are considered the top dairy areas-and Lyndonville has been in that area since 1884. They have two branches in Lyndon, plus others in St. Johnsbury, Enosburg Falls, Derby, and (looking ahead this year)  Morrisville.

    Also, surprisingly to some, they decided in 1999 to expand to Vergennes, specifically because of the Champlain Valley's ag heritage. On their website, there's a story about the difference that knowledgeable lending can make in this financial sector, from none other than Russ Carpenter, the founder of Champlain Valley Equipment.

    In 2001,his business had a chance to acquire a similar company, which would double their size. Time mattered, and when the bank he was working with asked for yet more paperwork, Carpenter balked.

    Could Lyndonville get it done faster? he asked. Yes, they could and did-and did so again in 2005, when another acquisition again expanded Champlain Valley Equipment to twice its size. Carpenter's summary: “We can't say enough about how well we are treated.”

    “We do a lot of operating lines of credit, as well as short-term financing,” said Lyndonville vice-president of commercial lending, in an interview. For anyone not familiar with the term “line of credit,” that's pre-authorization to borrow up to a certain total, a system that, for instance, lets a business buy extra raw material when an usually big order comes in. Seed, feed, a new hay baler -you can see the advantages.

    Speaking of seed and feed and balers, some of the area's dealerships and suppliers are themselves sources of credit. It can be as simple as knowing someone is in trouble and letting them up the bill a little more than usual until times get better, and it can be as carefully organized as the “crop loans” by Bourdeaus and Bushey in Middlebury.

    It's been 25 years since Jim Bushey and Germain and Remi Bourdeau bought the Wayne Feed Store, during which time they have added  a fertilizer mixing plant, fertilizer spreaders, new offices, a new warehouse, grain bins, liquid fertilizer storage, and a warehouse. They took over Feed Commodities in 2004.

    General Manager Jim Bushey said getting loans is an example of how it pays a farm to keep good records and have a financial plan. Operations that are on a sure footing like that can get 10-month loans for seasonal supplies, which will be paid off before beginning another cycle with perhaps a different loan amount.

    That sort of just-in-time delivery is characteristic of the feed-seed-supplies business, Bushey said. “It's a customer-driven business,” he said, to the extent that typically they make 90 to 95 deliveries in a day.

    Farmers are often members of cooperatives, many if not most members of the general public know. But they may not be aware there is a financial services cooperative, one that has an office in Middlebury and claims to be “The # 1 financial services cooperative in our three-state territory,” with about 2,000 mainly Vermont members, and including some areas of New York and New Hampshire.

    That figure comes from Ken Button, the Middlebury office head of Yankee Farm Credit. Gradually put together out of smaller cooperatives since 1916, and taking its present name in 1995, Yankee Farm Credit has “a market penetration of roughly 50 percent,” he said. Mike Farmer, associate vice-president and manager of the St. Albans office, said “Over time we have just combined the small entities together,” there having once been a dozen such government-sponsored cooperatives (compare the simultaneous consolidation among banks and among credit unions).

    The resulting entity had enough financial clout to write approximately $225 million worth of loans in 2006-and to send back about $2.6 million in “patronage refunds,” thus cutting the members' cost of those loans. One reason for financial services consolidation has been the escalating cost of running an office, with technology, regulatory requirements and all sorts of networking adding to the complexity. But as a result, Yankee members can now access tax services, record-keeping services. business software, business consulting, payroll services, estate planning,  appraisals-even life insurance.

    Yankee Farm Credit certainly isn't the only game in town. For instance, last October the Vermont Economic Development Authority's subsidiary VACC-the Vermont Agricultural Credit Corporation-announced a program of deferred payment loans to help dairy farms make the transition to organic production.

    But through the years, Yankee Farm Credit and the cooperatives that formed it have symbolized an important principle of Northeastern agricultural: just as Yankee ingenuity has overcome many obstacles, hardships and emergencies, so also financial ingenuity is one of the great resources in avoiding financial insolvency.

 


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