Do Well by Doing Good with Lending to Regenerative Agriculture

Are you tired of the risks in record overpriced stock and bond markets? Most publicly-traded investments are currently in a speculative bubble vulnerable to burst once the winds change.

A few pockets of alternative investment—including farming and agriculture—haven’t yet hopped on the bubble bandwagon. And what a novel idea, right?…investing in something we all need: good healthy food.

I recently made a starter investment by lending to a regenerative agriculture project here in Oregon via Steward Lending LLC (“Steward”). From this, I will receive a fixed amount of interest and principal paid back monthly over the term of the loan. This will likely be the first of several such agriculture projects for me.

You might also be interested in these lending opportunities so I thought I’d share a bit about Steward as well as my experience so far.

Who is Steward Lending LLC?

From their website:

Steward is a private lender, working with regenerative farmers, ranchers, fishermen, and producers to provide the capital they need to expand and sustain their businesses. As their businesses grow and generate more revenue, they pay back their loan with interest. It’s really that simple.

Through our platform, Steward gives qualified lenders the opportunity to purchase loan participations—meaning they can join in our mission by helping to fund the growth of regenerative agriculture in their community or across the country.

Steward was established in 2017 by Dan Miller and is the “encore act” to his prior success in co-founding Fundrise, one of the more well-known real estate crowdfunding platforms. Steward operates out of Portland, Oregon, but has remote employees around the country and internationally.

What is Regenerative Agriculture?

This phrase means different things to different folks, but Steward defines it as:

…Agricultural businesses that adopt agricultural practices that are self-sustaining and environmentally regenerative. Businesses should be using a systematic approach to focus on soil health and ecosystem management, which do not include using synthetic pesticides or fertilizers.

Steward and its network of borrowers maintain a commitment to techniques that protect the environment, public health, human communities, and animal welfare.

Their website goes into much greater detail here.

Who would I be lending to?

Steward reviews and approves the loan applications. They will only consider borrower applications where:

The farm or agribusiness uses sustainable and environmentally regenerative production practices.
There is 3+ years of experience owning or managing a commercial farm or agribusiness.
The business is making at least $10,000 in annual revenue and filing its tax returns.
There is limited outstanding debt and a solid record of debt repayment.
There is a strong network of potential lenders willing to become loan participants under the Steward program.
The applicant is in an eligible state. Steward can lend in most US states but not quite all just yet.

Generally, these borrowers are salt-of-the-earth kind of people. And banks and traditional lenders are primarily interested in funding much larger agricultural loans of much larger businesses. So Steward—and loan participants who join a project—definitely fill a targeted need.

Check out some of the successfully funded projects here.

What’s the typical loan size, term, and interest rate?

Steward indicates their loan size can range from $10,000 to $1,000,000. Annual interest rates range from 5% to 10%, with 6% to 8% being most typical. Loan terms are usually 36-60 months, with some terms going longer.

Loan repayments begin 3-6 months after funding and that’s when loan participants begin receiving their monthly interest/principal payments.

Who can be loan participants and how much must they invest?

Participant lenders who’ve set up a Steward account can make an individual farm loan for as little as $100.

Steward believes “we all have a role to play in ensuring that human-scale farms, ranches, fisheries, and producers can prosper, along with the communities they nourish.”

How does it work? What are the mechanics?

Once you’ve decided that this opportunity is appropriate for you, you set up your Steward account here. This is a new separate account with Steward. These are private lending opportunities and you cannot purchase them, for example, like an investment in your TD Ameritrade IRA.

Steward account set up is all handled digitally. Individuals need to upload identity verification such as a driver’s license or passport. Heads-up: I learned the hard way that the system won’t accept a pdf scan of your driver’s license. If you take a picture with your phone and upload the jpg photo file, that should do the trick.

Steward uses Dwolla as their payments platform and processor. It feels seamlessly integrated into the Steward website. Dwolla handles financial transfers from or to your bank, loan payments into your “digital wallet” (like an account), as well as Form 1099 tax reporting of your interest.

You will also link your bank account to your Steward account. That enables you to make outbound fund transfers (to Steward) via ACH or transfer inbound loan payments from your digital wallet to your bank account.

When you set up your account, you can arrange for Steward to email you whenever a new project has been approved so you can review it for potential funding.

Documentation includes a Lender Participation Agreement for each loan you make. That contains all the particulars and legal disclosures for the transaction.

Another heads-up: I was told by Steward that Dwolla does not yet accommodate joint account ownership. So I had to set up the account in my name only for now and then fill out a Steward Beneficiary Agreement designating my wife as beneficiary to receive loan payments in the event that I die or become incapacitated.

What are the fees?

Steward charges no fees to lenders, which is unique given the financial industry’s usual fee structures. Steward charges borrowers a one-time 3% (of loan principal) origination fee.

What are the risks?

Some of the more obvious risks might include:

This is a fairly young program.
Economic downturn generally may negatively affect borrowers and hinder their ability to manage debt repayments.
“Bad stuff” can happen to the agricultural operations of a particular borrower you’ve helped fund, hindering their ability to manage debt repayments.
Though each agricultural loan is backed by farm collateral, if the borrower falls on hard times the security interest may be insufficient to fully repay outstanding debt. In other words, if that happened you might not get your full investment back.

Who might this be a good opportunity for?

You see the value in regenerative agriculture and the need to do what we can to foster it.
You have surplus cash reserves outside of retirement and investment accounts.
You don’t anticipate needing those funds for lifestyle spending, emergencies, or other financial priorities.
You’re able to tie-up those funds for an extended period (5 years, for example) without crimping your financial needs.
You understand the potential risks and believe this opportunity is appropriate for you.

Final Remarks

Between vastly overpriced stock and bond markets and the “greenwashing” and ESG fakery of a lot of Wall Street investment products, it’s nice to know there are still some real opportunities to potentially do well by doing good in small-scale lending to regenerative agriculture.

Find Steward Lending LLC here.

This is not a Steward project, but here’s an interesting 24-minute video on a Colorado high-desert farmer engaged in regenerative agriculture.

Disclosure: This post is not investment advice nor a specific investment recommendation. I simply share what I discovered knowing it will be of interest to certain readers. SecondHalf clients: feel free to get in touch if you’d like advice on whether this opportunity may be right for you. Finally, I receive no compensation or benefit from Steward or any third party for this write-up.