20 Apr California FarmLink

Interview with Reggie Knox, Executive Director of California FarmLink

I met Reggie Knox of California FarmLink in 2016 at the Louisville, Kentucky meeting of Sustainable Agriculture and Food Systems Funders. Ironically, I had traveled to the middle of the United States to discover an organization headquartered a few miles away from my home in Aptos, California. Esther Park of Cienega Capital introduced us as part of a panel we organized on Investing in Agriculture including: Native American Natural Foods, and Custom Food Solutions. 

Reggie’s energy for supporting immigrant and beginning farmers and ranchers with financial and technical support for healthy and sustainable agricultural practices to California agriculture inspired me and in turn resulted in both an investment and a grant from the Swift Foundation to build out their vision for a transformed food system. Investments California FarmLink

Jen: How was the California FarmLink Fund started?

Reggie: FarmLink began in 1999, as a 501(c)(3) nonprofit. Initially, we provided support and information to help small and underserved farmers understand how and where to access capital and land. Very soon It became clear that few commercial lenders were willing to provide small loans to beginning, immigrant and low-income farmers we were helping. Our team began to learn about community development finance, and slowly began to grow our own loan fund to help underserved farmers access just, fair, and affordable financing. 

Jen: How are investment funds catalytic in a way that is different from other funds?

Reggie: We believe that diverse, small and medium-scale farm businesses are fundamental to the development of healthy regional food systems and communities. Organic, sustainable and regenerative agriculture play a critical role in stewarding our physical environment – soils, water, carbon and air quality. Many immigrants and farmers of color bring a wealth of knowledge and expertise in food production, and have suffered from systemic institutional discrimination. Our agricultural economy has suffered overall from chronic underinvestment in the innovative small farm sector. FarmLink’s impact investors are growing the nation’s first Community Development Financial Institution devoted to sustainable and regenerative agriculture. 

Rigoberto and his father Joaquin of Bucio Organic Farm use annual FarmLink operating loans to invest in the upcoming season.

Jen: How do you describe the kind of non-financial returns the fund offers?

Reggie: We use many of the tools used by traditional financial institutions to direct capital for the purpose of economic development, however, as a non-profit CDFI loan fund, our primary focus is not our bottom line, but the financial health of diverse small farm businesses and the development of healthy food systems. 

In addition to providing capital to farmers in the form of loans, our holistic approach enables farmers to access farm business educational courses and technical assistance, and helps farmers find land, develop secure leases, and create pathways to ownership. The goal of our lending program is ultimately to build long term intergenerational wealth by helping farmers not only with immediate capital needs, but also by deepening focus on the balance sheet, thereby growing family and business equity among low- and moderate-income families.

Jen: Can you describe how you use integrated capital to do your work?

Reggie: We believe in an integrated approach to developing successful small farm businesses – an approach that includes debt capital, grant capital, and technical assistance. Our lending and educational teams provide hundreds of hours of direct technical assistance every year to loan clients. Our educational initiatives include a wealth building program, a business resilience program, and conservation incentive programs. We champion the few federal and state programs that provide grants to farmers which include: California’s Healthy Soils Program and USDA’s Environmental Quality Incentive Program. We help farmers access these grant funds by providing technical assistance and bridge loans to implement conservation practices, the costs for which they will later be reimbursed by the government. 

When the pandemic hit, many of our farmer clients scrambled to find new markets to replace sales to restaurants and other impacted markets. To address the crisis, we administered 112 forgivable PPP loans, as well as 0% interest emergency loans, for a total of $2.5 million in 2020. The crisis is helping us understand small farm vulnerabilities and craft a new work approach that we’re calling “development lending.” This will include grants and longer term working capital loans (patient capital) alongside annual operating loans. Under the Biden Administration, we hope to influence USDA’s credit programs to integrate aspects of this new approach. 

Jen: What is transformational about the businesses and entrepreneurs you invest in?

Reggie: They are shaping the future of California agriculture and the state’s local food systems by growing farm businesses focused on sustainable, organic and regenerative farming practices that inspire people to learn where their food comes from. Immigrants from Mexico and Central America, as well as refugees from Southeast Asia and their descendants, are among the most important up and coming segments of California agriculture. These groups and others, due to language barriers, lack of established credit, and cultural and marketing practices, are poorly understood by conventional financial institutions, and have suffered from disinvestment and discrimination.

Many of our clients started as field workers or food processing workers in the industrial food system, and are highly motivated to start their own small businesses. Their resilience, entrepreneurship, and drive to succeed is impressive and it is an honor to provide support to these businesses that represent the future of agriculture in California.

Efren Avalos of Avalos Farms has been a leader in the Monterey Bay area’s small farm community with the support of California FarmLink’s low-interest loans.

Jen: What does a foundation or donor advisor need to understand in order to invest in transformational businesses?

Reggie: While the entrepreneurs that we support may not have well-established credit histories, or decades of experience running their own businesses, they typically bring a high level of dedication and farming experience to their business. 

As a mission-based development finance organization, we offer fair and affordable interest rates, based on our belief in ‘Slow Money’ principles which start with, “We must bring money back down to earth.” High expectations for rate of return and liquidity are often contrary to the potential for good that results from placement of patient capital. 

Jen: What do you tell foundations or investors who think your fund is risky?

Reggie: By taking the extra time to build trust through face-to-face relationships with these farmers, and making the extra investment in farm business education (made possible with philanthropic support for our work) these businesses have a high likelihood of success. In fact, FarmLink’s cumulative charge off rate has remained below 1.5% for the last several years. We take great care to support farmers’ successful repayment – their success is truly FarmLink’s success in achieving our mission to invest in the prosperity of farmers and ranchers.

Bertha Magaña farmer of Magaña Farms, became FarmLink’s first female mortgage borrower.

Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?

Reggie: We have always been deliberate about connecting with and serving farmers of color, immigrants, and women farmers. In the last two years, and especially during the great drive for racial equity that unfolded in 2020, we have deepened our focus on diversity, equity and inclusion. We have deliberately increased the number of farmers and people of color on our staff and board and embarked on an internal journey of learning and action to integrate DEI Principles and practices into all aspects of the organization, from lending to educational programs, governance and administration. 

We are in the initial stages of defining a Farmer Advisory Council to provide increased input and innovation into loan procedures and policies directly from the farmers we serve. We are excited to continue this work this year and into the future!

California Farmlink