Starting Early: Inside Community First’s Youth Agriculture Lending Program

Sometimes eight-year-olds need $2,500 loans, and the credit unions that can provide them – thus putting young entrepreneurs on the path to future financial success – stand to win lifetime members. Such cash infusions are real needs for children across the U.S. who participate in 4-H, Future Farmers of America (FFA) or other programs that encourage young farmers to raise their own livestock for sale at county fairs.

Caring for animals comes with hefty expenses like buying feed and other supplies, and parents often do not have the resources necessary to get their kids started. Families with multiple kids in such programs may need to spend $6,000 to $8,000 all at once, explained Rebecca Nystrom Brito, member development specialist at Community First Credit Union.

The California-based CU sought to solve these problems by launching a financial support program to supply children and teens with loans while also teaching them smart money management.

“A lot of these kids do go into the agriculture industry, and many of them come back [to Community First], especially when they’re starting businesses or joining their families’ businesses, whether they’re looking for business accounts or loans,” Nystrom Brito said.

Tailoring Loans to Young Entrepreneurs

Community First has been offering youth agriculture loans of $100 to $2,500 at 0 percent interest for five years. Aspiring farmers receive loans, learn how to use debit cards and write checks and receive assistance with business plans and managing budgets. Approximately half of the participants return for new loans the following year, something that is especially true for high schoolers.

Loans are typically issued in March or April, with repayment due after local county fairs in September and October. The average customer uses most of the loaned value, but often earns back twice the principal at sale. Community First encourages borrowers to put their profits into special-rate savings accounts for their college tuitions, first cars or next year’s livestock expenses.

The CU reports that participation in the program is growing, and that it loaned out $320,000 to approximately 150 teenagers and 50 younger children this spring alone. Demand is expected to grow even further in the future.

Security and Long-Lasting Impact

There is some risk when it comes to offering loans to young members. Parents cosign the loans, but Community First emphasizes that young members should have the experience of treating these loans as their first financial obligations. No students involved in the program have failed to sell at county fairs or repay their loans, but some have needed to negotiate extensions due to issues with livestock or delays in receiving payments, Nystrom Brito noted.

“These are animals – things do happen,” she said. “Our rule of thumb has always been, as long as you give us a call and tell us what’s going on, we’ll work with you and you won’t get in trouble.”

Children’s inexperience often shows through, too. The CU once had an issue in which a child was so excited to receive a debit card that they posted a photo of it on social media, number included. Despite the challenges of serving children, programs like these can be valuable tools when it comes to teaching responsible financial habits and awareness. Giving financial familiarity to children is an asset, and the program also starts them off with credit histories that can give them an advantage later in life.

“When they’re going off to get their first credit card or auto loan, they have an established [credit] score so they’re not starting from scratch. [They will] have a leg up on everyone else,” she said. “We’ve even had kids come back and say, ‘I got a job because they ran my credit and I had a score.’”

Many consumers who participated in the program as teenagers often return to the CU for credit cards, auto loans and other services.

Their established relationship with the FI and their understanding of loans and the repayment experience make it easier for Community First to approve their applications.

Technology Tools

Providing the right digital tools has enabled the CU to extend its youth agriculture loans to more of its members. New customers are required to visit one of Community First’s 11 branches to learn about and enroll in the program, but it can be hard for parents to fit a visit into their schedules. An electronic signing service allows children whose parents live or work far from the CU to participate.

“If someone works in the Bay Area, there’s no way they’ll get back to Sonoma County by 5:30 with traffic,” Nystrom Brito noted.

Youth members also tend to be smartphone-savvy, and many returning borrowers take advantage of the opportunity to apply online.

Community First may not be making money off its zero-interest youth agriculture loans, but programs like these pull in new customers, foster loyalty and boost financial literacy among younger members of the community. When the unseasoned eight-year-old who applies for a loan this year returns next year, she is likely to return as a smarter customer – and one who is likely to keep returning for years to come.