Key Takeaways:
- Fractal announces the expansion of its farmland co-investment product, having raised over $15 million in capital.
- The expansion comes as American farmers face significant financial challenges, with falling farm income and higher interest rates.
- Fractal’s model offers flexible capital to farmers by taking minority investments in land while keeping farmers in full control.
- The company has already deployed $8 million across 12 deals in five Midwestern states.
Fractal, a U.S.-based company dedicated to bridging a crucial gap in farmer financing, has announced the expansion of its farmland co-investment product. This development follows Fractal’s successful raising of more than $15 million in capital, of which $8 million has already been deployed to support leading farmers across the Midwest.
Context of Financial Strain
This expansion comes at a particularly challenging time for American farmers, who are currently grappling with some of the most severe financial pressures since the 1980s. According to projections by the USDA, net farm income and working capital are expected to decline by 37% and 21%, respectively, from 2022 levels. Additionally, interest rates on farm loans have surged to as high as 8-9%, further straining farmers’ financial resources. Despite these hardships, competition within the agricultural sector remains fierce, with continued consolidation and the looming presence of outside investors seeking to capitalize on lower land values.
Chris Barron, a fourth-generation farmer in Iowa and a farm financial consultant with Ag View Solutions, remarked on the severity of the current situation: “We’ve seen one of the largest declines in working capital and farm incomes over the past year that I’ve seen in my 30+ years in agriculture. Rates are higher, and banks aren’t lending as much, so this doesn’t look like 2014. This also presents a unique opportunity for the best-positioned farmers to make strategic investments with lower competition.”
Fractal’s Co-Investment Model
Fractal’s farmland co-investment product is designed to provide family farms with the capital they need to make critical business investments. Unlike traditional debt, Fractal’s capital comes with lower and more flexible annual payments, offering farmers a chance to share in the potential appreciation or depreciation of their farmland. The company’s approach involves taking passive, minority investments in farmer-owned land, allowing farmers to maintain full ownership and control of their operations while benefiting from a 10-year commitment from investors.
Ben Gordon, CEO of Fractal, emphasized the growing importance of accessible capital for farmers: “Capital is quickly becoming farmers’ biggest need on the farm. For many farmers, it may be the difference between buying out a landlord versus losing acres or making key investments versus pushing them off another year. Putting capital alongside farmers while keeping them in control not only strengthens farm businesses and keeps money in rural communities, but we also believe it drives better returns for investors and better stewardship of the land.”
Expanding Support for Farmers
Following the deployment of $8 million in investments across five Midwestern states and 12 deals, Fractal is expanding its footprint to meet the critical financial needs of farmers. The company’s approach is seen as a valuable alternative to conventional debt financing, offering farmers greater flexibility and security in a challenging economic environment.
Jesse Hough, a multi-generational farmer and Fractal customer from David City, Nebraska, highlighted the importance of innovative financing solutions like Fractal’s: “Growing family-owned farms requires significant cash for the capital needed for land, improvements, and equipment. We need products like Fractal to help fill the gaps and provide opportunities for cash capital other than debt, which is the conventional way in agriculture to get cash.”
