California FarmLink Cultivates Creative Capital for Underserved Farmers

Sacha Adorno

This is the fifth in a six-part series spotlighting CDFIs in the Wells Fargo Works for Small Business®: Diverse Community Capital program network, funded with a $175 million commitment to help diverse small businesses grow, through a story and case study that highlight an innovative program or service of these CDFIs.

Farming follows predictable cycles, but farmers getting paid for the bounty they produce often does not.

“After the spring harvest, farmers may wait weeks to get paid by distributors for their products. This cashflow crunch is a hardship, especially for small farms and farmers who don’t qualify or can’t wait for interim bank financing,” said Brett Melone, Director of Lending, California FarmLink, which is part of the Wells Fargo Diverse Community Capital (DCC) network.

As a CDFI that supports beginning, limited-resource, immigrant, and other underserved farmers—nearly 85% of its borrowers are immigrants, women, or farmers of color—FarmLink is in the business of solving problems like this crunch.

Working across California, with a focus on the Central Coast, Central Valley, and North Coast regions, FarmLink provides critical access to capital for small- and mid-sized farms in California through a combination of direct lending, referrals, and connections with alternative financing.

Although it has a West Coast focused service area, the CDFI’s innovation reaches far and wide. “FarmLink is a thought leader. We frequently look to them for ideas and share strategies back and forth,” said Rick Larson, Senior Vice President and Director of Strategic Initiatives for Natural Capital Investment Fund (NCIF), also a member of the DCC network. “They pioneer effective, non-traditional approaches to lending to farmers of color and are very deliberate about developing loan products and technical assistance needed to effectively support the populations they serve.”  

Bridging the Gap

An example of FarmLink’s pioneering work are two products designed specifically to help farmers bridge gaps in cash flow during fallow payment periods. In different ways, each offers capital based on sales to farmers in good standing with local distributors.

One, a Purchase Order Advance (POA), advances operating capital against a purchase order before crops are grown or harvested.

“It’s more like an operating loan because farmers receive their money before they actually produce or sell anything,” Brett explained of the product developed in collaboration with Mandela Partners, a nonprofit that partners with communities to improve health, create wealth, and build assets through local food enterprises. “Payment is based on a projection, a purchase order essentially. And the underwriting we do is pretty minimal because there’s already an established relationship between farmer and buyer and there’s a commitment to purchase.”  

The other product is an Accounts Receivable Advance (ARA) that extends up to $25,000 in bridge capital.

“This product significantly reduces the time it takes a farmer to get paid, from about 28 days to about 10 days,” said Brett. “The improvement in cash flow is particularly critical early in the season.”

Cash and Much More

In total, since the ARA launched in 2013 and the POA in 2014, FarmLink has loaned $1.5 million through the revolving products to 35 farmers, 95 percent of whom are farmers of color, and 35 percent of whom are women.

“The communities we serve historically lack access to traditional financing because of limited business experience, collateral, and credit history. Many also face language and cultural barriers that prevent them from connecting to networks that spur entrepreneurial growth and success,” Brett said. “Nevertheless, low-income minority farmers are a growing demographic in our state’s agriculture. Products like the POA and ARA do more than fill capital gaps, they also help farmers build credit and open a door to other technical assistance supports at FarmLink. In the end, these products can enable farmers to build a stronger business profile and voice in California’s agricultural community.”


About Wells Fargo Works for Small Business®: Diverse Community Capital program

The Wells Fargo Works for Small Business®: Diverse Community Capital program (DCC) will deliver $175 million in capital to Community Development Financial Institutions (CDFIs) that serve diverse small businesses. Since program launch, DCC has awarded $94.8 million in grants and capital to CDFIs to grow their lending and services to diverse small businesses.

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