Progress 09/01/21 to 08/31/23

Outputs
Target Audience:The agCredit approach was conceived in 2018 and the Phase I proposal was awarded prior to the Covid-19 pandemic.It was hypothesized 1) that digital lending is adaptable to smaller-scale agricultural producers in rural areas, and 2) community banks are slow adopters of new approaches and technologies.The American Recovery Plan act stimulus was awarded throughout the course of the Phase II project.It is believed that the pandemic created fatigue within most community bank executive management teams.More so, the stimulus caused inflation and monetary policy actions increased the fed funds rate by five percent in the past two years.Legacy community banks would scramble for liquidity to fund normal loan demand, let alone provide funding and capital to support a new delivery approach.Over the course of the SBIR Phase II project, the fall-out of the pandemic would shift the dual end-user approach (next generation farmers and ranchers and rural based community banks) to a single end-user approach: next generation farmers and ranchers. Consequently, agCredit made the decision to pivot from a Software-as-a-Service (SaaS) business model to a Banking-as-a-Service (BaaS) business model, where we will partner with one bank.We will use the partner bank's core system to book and account for the loans, and then pool and sell the loans to other community banks, thus holding true to our mission of keeping the business of banking relevant in rural America. The target audience that agCredit focused on during the project were: 1) smaller-scale beginning farmers and ranchers in rural areas (the underserved) and 2) community banks with an interest to become our BaaS partner or an interest to buy into the loan pool. Producer Profile: Agricultural producers in rural areas: Gross Revenues: Less than $250,000 (includes approx. 88% of 2 million farms in the U.S.) Off-Farm Income: Greater than $25,000 Experience: 3 to 10 years of operating a Farm or Ranch Loans: Less than $100,000 Production Concentrations [1]: Beef Cattle, Corn, Soybeans, Wheat, Hay, and Pastureland. Target Lender Profile: U.S. community or reginal banks looking to expand their market reach and attract next generation customers, either as a BaaS partner or a purchaser of loans. Bank Charters with Concentrations of Agricultural Loans Greater than 25% of Leverage Capital: Nebraska (144), South Dakota (48), Wyoming (18), Colorado (35), and Kansas (178) (Data provided by Federal Reserve Bank of Kansas City, September 2020) Farm Service Agency Preferred Lender Program (PLP) or Certified Lender Program (CLP) Approved Lenders: Nebraska (121), South Dakota (54), Wyoming (18), Colorado (42), and Kansas (130) (Data provided by USDA FSA National Office, March 2020) Initial Target Market Location: Nebraska, South Dakota, Wyoming, Colorado, and Kansas Initial application development will focus on commodities produced in middle America, yet the design will be adaptable and scalable to producers of agricultural commodities across the U.S., including urban agriculture. [1] Accounts for over 70% of farm revenues for typical beginning farmers. In the first half of the project, agCredit successfully reached four of its five original beta banks; Homestead Bank, Nebraskaland Bank, MNB Bank, and Bruning Bank. These banks helped validate the EasyLoan Scorecard by reviewing its original five live use cases. agCredit asked the banks to evaluate the use cases and their scores and complete a brief survey to indicate whether they agree with the scores. In addition, agCredit reached a new beta bank, Bank of the Valley, who, along with Nebraskaland Bank and Homestead Bank, helped further validate the scorecard by providing agCredit with five real loan scenarios from loan applications they've recently processed. agCredit scored these loans via the EasyLoan Scorecard and sent the results back to the bank. Each bank completed a follow-on survey stating whether they agree with the scores.agCredit met with several additional banks who provided feedback over the second year of the grant. agCredit was also able to successfully engage several beginning ag producers, who meet the target profile, by having them test the app and complete a UAT survey. These ag producers also provided valuable feedback, re-confirming that digital lending is adaptable to agricultural for smaller scale next-generation producers. Changes/Problems:In the first half of the project, agCredit had a difficult time getting a response from some of the original beta banks. Covid-19 hurdles, PPP loans, compression of Net Interest Margins (earnings), and the Great Resignation have caused fatigue for many community banks, who already adopted technology at a slow pace before these issues arose. These issues continued over the next year of the project, in addition to added regulatory burden, rate increases and a liquidity crisis. The unintended consequences of these issues and legacy banks' slow pace of technology adoption do not align with today's fast pace of change. Simply put, next generation users will continue to adopt new technologies at a faster pace than what is offered by legacy banks. Due to the slow rate of adoption by community banks, follow-on R&D over the course of the project concluded that a pivot from a subscription model (SaaS) to a Banking-as-a-Service (BaaS) model is necessary to realize commercialization. Agcredit Consulting, LLC will partner with a BaaS provider to fund the loans obtained through the agCredit.bank application. Agcredit will provide a network of agents to underwrite and service the loans. The unguaranteed portion of the loans will be held by the BaaS provider, while the FSA guaranteed portions will be pooled and sold to other community banks. This model keeps the business of banking relevant in rural America by allowing community banks to benefit from the interest income received from new agricultural loans without having to expend their limited resources to underwrite and service the loans, while expanding access to credit to underserved farm and ranch producers. What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?agCredit has been able to disseminate the results through collaborative partnerships with stakeholders and meetings with beta banks and potential partner banks. In September 2022, Emily Rischling, Authorized Representative, and Steve Cleveland, Lendor Advisor, presented the agCredit.bank application to participants of the University of Nebraska LEAD 40 program. The participants consist of agricultural leaders from across the state of Nebraska, many fitting the demographic of agCredit's target audience. The LEAD 40 participants participated in agCredit's research on the adaptability of digital lending in agriculture, and LEAD 41 participants were introduced to the agCredit application near the end of the SBIR Phase II grant period. In November 2021, Nebraska Extension invited Lender Advisor Cleveland to participate on a Beginning Farmer Panel sponsored by Nebraska's Institute of agriculture and natural resources. Cleveland and agCredit learned about the next generation of value-added and vertical integrated agricultural entrepreneurs. Cleveland was able to disseminate some results of the project to the audience, specifically that the next generation leans towards applying digitally, but human interaction is important, where the 50 plus age producers lean towards a face-to-face application. In March 2022, FSA Administrator, Zach Ducheneaux, invited Lender Advisor Cleveland to participate on his panel at the National Forum of Young, Beginning, and Small Farmers, sponsored by the Farm Credit Administration, on the campus of Colorado State University. Agcredit met the FSA Farm Loan Program's senior leadership team. They were able to strengthen their relationship on the journey to find mutual benefit to improve access to credit to the next generation of ag producers by researching and developing a customer facing agricultural digital lending application. The agCredit team kept continued contact with Administrator Ducheneaux over the course of the SBIR grant period and provided updates, when necessary. Spencer Morris, Project Director, and Rischling demonstrated the agCredit.bank application to a tour group of agricultural influencers from across the country at the Don't Panic Labs office in Lincoln, NE as part of "The Good Life is Calling" campaign in May 2022. The tour group wanted a taste of the innovations that are happening in the Nebraska Ag space. The agCredit team participated as a vendor at the 2022 American Bankers Association Agricultural Bankers Conference. During the conference results were disseminated to lenders from across the country and ABA and FSA officials. Over the course of the grant period, agCredit met with over a dozen banks to introduce them to the project, provide them with updates, and present the research findings that digital lending is adaptable to agriculture for next generation producers. One bank in particular, a CDFI bank in Colorado, saw a strong mutual benefit between themselves and agCredit. After traveling to Colorado in April of 2023 to meet with bank leadership in person, it was clear that the agCredit.bank approach aligned with a CDFI methodology. The CDFI bank is creating their own software to help matchrural-based lenders and economic developers with financing and capital solutions.There is a strong potential for a partnership between the two companies to further disseminate the results of agCredit's SBIR program to communities of interest across the country. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? Objective 1: agCredit, in collaboration with four beta banks and USDA FSA Nebraska State Office, will validate the EasyLoan Scorecard model. The EasyLoan Scorecard was successfully validated with fifteen new live use cases provided by beta banks. Utilizing TABA resources, agCredit adopted a 'Model Risk Management Policy' to guide ongoing model validation through the beta (1.0), limited (2.0), and full (3.0) release. Objective 2: agCredit, in collaboration with Don't Panic Labs of Lincoln, NE, will implement at least four (4) features that will improve process efficiency, financial literacy, and access to credit. The four features will include pre-filling FSA guarantee loan applications, financial literacy hover definitions, secure document sharing, and secure engagement. agCredit developed sevennew features: NAICS Code categorization, secure document sharing, hover definitions (financial literacy), pre-fill of FSA guarantee applications,KYC verification, secure communication, and balance sheet development,in addition to adopting regulatory compliance policies. NAICS Codes: To better help facilitate pre-filling FSA applications, our operating loan application needed to be adjusted to include NAICS codes to classify commodity types for a producer's operation. We dynamically walk the producer through drilling down into their specific operation's code. KYC Verification: We implemented KYC via a third-party react-native SDK provided by Jumio. This allows us to verify the user's personal information from their government ID, such as a driver's license, as well as match their face to the ID. It implements a degree of "liveness" to distinguish between a real person and something like a photograph. Document Upload: Utilizing our existing Azure infrastructure, we include the functionality for a producer and loan officer to upload documents on a mobile device and our admin portal respectively. Pre-Fill FSA Applications: We implemented the ability to pre-fill FSA applications with the data that we currently collect during the loan application process. In addition, the loan officer can pull up the application within our admin portal and update any information on the application itself. Then the loan officer can export the final loan application. Hover Definitions: We implemented hover definitions through the loan application process that are popup tooltips with definitions for different terminology throughout the application. This is designed in a way to be easily implemented as we need and as the application grows. Balance Sheet Development: We implemented the ability for a farmer or rancher to develop a balance sheet into the application. The process intuitively guides the producer through the process of creating a balance sheet for a specific time period. The Hover definitions are used in this section to further aid user comprehension. We saw this as a valuable and much-needed feature, as many beginning farmers and ranchers lack these financial statements. Because of its urgency, we moved this feature ahead of multi-language translation and secure communication. Secure Communication: We implemented secure communication via a third-party vendor, Invo Solutions. Invo Solutions provides a mobile SDK that we implemented into the mobile app for customers to use to chat in real-time with a loan officer. They also provide an online portal for all of the loan officers to log into that will allow them to chat in real-time and schedule meetings with a customer. We are planning to add a video chat option that is projected to be completed by Q3 2024. Compliance Integration: We worked with the TABA vender to integrate regulatory compliance features into the application. Objective 3: The agCredit team will develop the product roadmap that includes added features and budget for follow-on commercialization and will evaluate licensing needs. Agcredit's trademark attorney drafted a Master Services Agreement and a Trial Order Form that will be used as a contractual agreement and protect agCredit's intellectual property with the company's bank partner. The agCredit team created a pricing model for the agCredit.bank application and business model. The agCredit team anticipated the need for capital after the Phase II grant period and prepared for a $250,000-$500,000 pre-revenue raise. The team created a Pre-Commercialization Plan that includes a 9-month budget of $250,000 and details six implementation phases needed to reach revenue: Phase 1 - Month 1-3: Finalize BaaS Partnership Phase 2 - Months 4-5: Setup and Testing Phase 3 - Month 6: Refinement and Optimization Phase 4 - Months 7-8: Pilot Launch and Feedback Collection Phase 5 - Month 9: Full Launch and Revenue Generation Key Performance Indicators (KPIs): Number of Users: Monitor the growth in the number of users of the agCredit.bank app. System Uptime and Performance: Ensure high system availability and responsiveness. User Satisfaction: Gather user feedback and track user satisfaction scores to gauge the quality of our services. Loan Funding Volume: Measure the actual loan funding facilitated through the BaaS partnership with the bank against the $10 million target. After completing pre-commercialization preparation, the team created a product roadmap for the next set of features that will be added to enhance the agCredit.bank application after commercialization. Objective 4: agCredit will identify three cloud-based core system providers to commercialize agCredit that provide producer and lender portal access, loan portfolio accounting, facilitate payments, data storage, etc. At the start of the SBIR journey, we envisioned agCredit.bank as a Software as a Service (SaaS) business model.This model envisioned rural, community banks using the agCredit.bank application to better serve their next generation customers, as well as receiving new business from "unattached loan applications" submitted by farmers and ranchers across the country who found the agCredit.bank app on their own. With this business model, agCredit would need to use and select a core-system for loan portfolio accounting.However, a BaaS model allows agCredit.bank to provide the front-end technology while leveraging the BaaS provider's banking license and back-end systems and technology already in place.It would shift the focus from selecting a core system to selecting an exclusive BaaS provider. Through the course of SBIR Phase II, agCredit met with two core system providers, Computer Services, Inc. (CSI) and Data Center, Inc. (DCI). Both companies are smaller than many of the other core system providers, making it possible for them to allow more product flexibility than some of the larger providers.We also met with Finastra, a fintech company that provides a large range of solutions to financial institutions across the globe. Many of the banks we've spoken to use Finestra's loan documentation system, LaserPro.

Publications

Progress 09/01/21 to 08/31/22

Outputs
Target Audience:agCredit has two customer segments: 1) community banks who subscribe to the tool for improved loan processing (includes on-boarding existing small borrowers with aggregate borrowings of $250,000 and less), to aid in lead generation, to buy into the loan pool, and for streamlining FSA guarantee underwriting to mitigate risk, and 2) producers seeking an online/mobile ag loan and are not associated with a bank (competing with FCS and other non-bank lenders). Target Lender Profile: U.S. agricultural bank with branch banks located in rural areas: Bank Charters with Concentrations of Agricultural Loans Greater than 25% of Leverage Capital: Nebraska (144), South Dakota (48), Wyoming (18), Colorado (35), and Kansas (178) (Data provided by Federal Reserve Bank of Kansas City, September 2020) Farm Service Agency Preferred Lender Program (PLP) or Certified Lender Program (CLP) Approved Lenders: Nebraska (121), South Dakota (54), Wyoming (18), Colorado (42), and Kansas (130) (Data provided by USDA FSA National Office, March 2020) Initial Target Market Location: Nebraska, South Dakota, Wyoming, Colorado, and Kansas Target Producer Profile: Agricultural producers in rural areas: Gross Revenues: Less than $250,000 (includes approx. 88% of 2 million farms in the U.S.) Off-Farm Income: Greater than $25,000 Experience: 3 to 10 years of operating a Farm or Ranch Loans: Less than $100,000 Production Concentrations[1]: Beef Cattle, Corn, Soybeans, Wheat, Hay, and Pastureland. Initial application development will focus on commodities produced in middle America, yet the design will be adaptable and scalable to producers of agricultural commodities across the U.S., including urban agriculture. [1] Accounts for over 70% of farm revenues for typical beginning farmers. In the first half of the project, agCredit successfully reached four of its five original beta banks; Homestead Bank, Nebraskaland Bank, MNB Bank, and Bruning Bank. These banks helped validate the EasyLoan Scorecard by reviewing its original five live use cases. agCredit asked the banks to evaluate the use cases and their scores and complete a brief survey to indicate whether they agree with the scores. In addition, agCredit reached a new beta bank, Bank of the Valley, who, along with Nebraskaland Bank and Homestead Bank, helped further validate the scorecard by providing agCredit with five real loan scenarios from loan applications they've recently processed. agCredit scored these loans via the EasyLoan Scorecard and sent the results back to the bank. Each bank completed a follow-on survey stating whether they agree with the scores. agCredit is also in conversations with two new beta banks, who we hope will help us live-test the app and reach commercialization and revenue. agCredit was also able to successfully engage several beginning ag producers, who meet the target profile, by having them test the app and completea UAT survey. AC plans to continue engagement with the target producer profile through live testing of the app in the second year of the grant. Changes/Problems:agCredit hashad a difficult time getting a response from some of the original beta banks. Covid-19 hurdles, PPP loans, compression of Net Interest Margins (earnings), and the Great Resignation have caused fatigue for many community banks. agCredit is understanding of this and was able to secure an additional beta bank, Bank of the Valley. agCredit is also communicating with two additional community banks to help with the next phase of testing. agCredit maintains a good relationship with all their beta banks and will continue to keep them updated on the development progress and allow them the opportunity to become early adopters, if they so wish. What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?agCredit has been able to disseminate the results through collaborative partnerships with stakeholders and meetings with Beta Banks and potential Beta Banks. In November 2021, Nebraska Extension invited Lender Advisor Cleveland to participate on a Beginning Farmer Panel sponsored by Nebraska's Institute of agriculture and natural resources. Cleveland and agCredit learned about the next generation of value-added and vertical integrated agricultural entrepreneurs. Cleveland was able to disseminate some results of the project to the audience. In that the next generation leans towards applying digitally, but human interaction is important, where the 50 plus age producers lean towards a face-to-face application. In March 2022, FSA Administrator, Zach Ducheneaux, invited Lender Advisor Cleveland to participate on his panel at the National Forum of Young, Beginning, and Small Farmers, sponsored by the Farm Credit Administration, on the campus of Colorado State University. Agcredit met the FSA Farm Loan Program's senior leadership team. They were able to strengthened their relationship on the journey to find mutual benefit to improve access to credit to the next generation of ag producers by researching and developing a customer facing agricultural digital lending application. Spencer Morris, Project Director, and Emily Rischling, Manager and Authorized Representative, demonstrated the agCredit.bank application to a tour group of agricultural influencers from across the country at the Don't Panic Labs office in Lincoln, NE as part of "The Good Life is Calling" campaign in May 2022. The tour group wanted a taste of the innovations that are happening in the Nebraska Ag space. agCredit consistently meets with Beta Banks, and potential Beta Banks, to provide them with updates on the project. During these meetings, agCredit shared the scorecard results with the participating beta banks and received feedback via a survey. What do you plan to do during the next reporting period to accomplish the goals?To complete Objective 2, agCredit will add a secure communication feature into the app during the next reporting period. AC will collaborate with Don't Panic Labs to plan a detailed workflow on how and where documents will be uploaded, utilize our existing Azure hosting to accomplish secure document storage and retrieval, and ensure the solution we implement is easily scalable for any future document storage needs. Objective 3:The agCredit team will develop the product roadmap that includes added features and budget for follow-on commercialization and will evaluate licensing needs. Rischling is planning on dedicating herself to the project full-time in the second phase of the grant to help transition agCredit from R&D topre-commercialization. Rischling and Morris will identify the next set of features and evaluate the potential of 'virtual collateral submission' and the building of balance sheets and cash flow plans. The team will engage Lender Advisor Kathleen Hruska to evaluate and plan for the preparation of loan documents. Additionally, the team will plan for the capability to match 'unattached loans' to subscriber banks and to pool loans to sell to subscriber banks, aligning with the overall business model. Rischling and Morris will also develop a plan to integrate the next set of features and develop a follow-on commercialization product roadmap. Objective 4:agCredit will identify three cloud-based core system providers to commercialize agCredit.bank that provide producer and lender portal access, loan portfolio accounting, facilitation of payments, data storage, etc. Rischling and Morris will develop a list of essential features and requirements for a cloud-based core system to deploy the business model. Rischling will identify three potential cloud-based core providers and solicit due-diligence materials.

Impacts
What was accomplished under these goals? Objective 1: agCredit, in collaboration with four beta banks and USDA FSA Nebraska State Office, will validate the EasyLoan Scorecard model. The EasyLoan Scorecard was successfully validated with fifteen new live use cases provided by beta banks. Utilizing TABA resources, agCredit adopted a 'Model Risk Management Policy' to guide ongoing model validation through the beta (1.0), limited (2.0), and full (3.0) release. Objective 2:agCredit, in collaboration with Don't Panic Labs of Lincoln, NE, will implement at least four (4) features that will improve process efficiency, financial literacy, and access to credit. The four features will include pre-filling FSA guarantee loan applications, financial literacy hover definitions, secure document sharing, and secure engagement. agCredit developed five new features: NAICS Code categorization, secure document sharing, hover definitions (financial literacy), pre-fill of FSA guarantee applications, and KYC verification, in addition to adopting regulatory compliance policies. AC will implement secure engagement during the next half of the project. NAICS Codes: To better help facilitate pre-filling FSA applications, our operating loan application needed to be adjusted to include NAICS codes to classify commodity types for a producer's operation. We dynamically walk the producer through drilling down into their specific operation's code. KYC Verification: We implemented KYC via a third-party react-native SDK provided by Jumio. This allows us to verify the user's personal information from their government ID, such as a driver's license, as well as match their face to the ID. It implements a degree of "liveness" to distinguish between a real person and something like a photograph. Document Upload: Utilizing our existing Azure infrastructure, we include the functionality for a producer and loan officer to upload documents on a mobile device and our admin portal respectively. Pre-Fill FSA Applications: We implemented the ability to pre-fill FSA applications with the data that we currently collect during the loan application process. In addition, the loan officer can pull up the application within our admin portal and update any information on the application itself. Then the loan officer can export the final loan application. Hover Definitions: We implemented hover definitions through the loan application process that are popup tooltips with definitions for different terminology throughout the application. This is designed in a way to be easily implemented as we need and as the application grows. Compliance Integration: We worked with the TABA vender to integrate regulatory compliance features into the application (See Attachment B). The back-testing of compliance policies will take place in year-two. Objective's 3 and 4 will be completed in year 2 of the project.

Publications