Farm Stays are Fueling Transitions to Regenerative Agriculture and Making Human-Scale Farms Financially Stable. So Why Won’t Lenders Provide Capital for On-Farm Hospitality?
To answer this question, we first have to ask another. Just what exactly is agriculture?
The USDA, Farm Credit lenders, and even community banks have clear definitions of what “agriculture” is, and even more importantly, what it isn’t. The narrow, commodity-driven definitions they use almost never align with the realities of a complex agricultural ecosystem and the many symbiotic relationships — biological and otherwise — that contribute to its health and resilience. Unfortunately, these definitions, and the practices they support, separate thousands of regenerative producers from the capital they need to grow and succeed. By erecting these barriers, both farmers and lenders miss out on the incredible profit potential of real, regenerative agriculture, with all the stacked enterprises and diversification that make it thrive.
If agricultural lenders can expand their understanding of what exactly a farm is, American agriculture could experience something that has been missing for generations: long-term financial stability. At Steward, we’re committed to supporting a broader scope of regenerative agriculture, including all the creative elements that contribute to sustainable growth and resilience.
One of our newest partners, Studio Hill in Shaftsbury, Vermont, is a great example of how on-farm hospitality can become the financial engine that fuels the transition to regenerative management and sets up long-term growth.
Studio Hill — The Early Years
After living through the systemic collapse of The Great Depression, Caroline McDougall’s great-grandparents bought a hilltop farm in Southern Vermont in 1936. For two generations, the family made a living milking a small herd of dairy cows. But after 28 years of production, the dairy was shut down when they couldn’t afford to make mandatory facility upgrades. It would be another decade until Caroline’s aunt Edie transitioned the property to a horse boarding and training facility. New grazing grasses were sown, and the farm entered a second chapter, which, under Edie’s direction, would last for forty years.
Edie ran a successful business while managing the land the only way she and her neighbors knew how — with the conventional agrochemicals every supply store sold and every extension agent recommended. It was a well-known package deal: heavy tillage to prepare the ground, synthetic chemicals to fuel new growth, herbicides to kill weeds, and pesticides to kill bugs. Everything performed as advertised. Until, in 2011, Edie got sick with brain cancer.
“A woman who was never sick a day in her life got sick,” Jesse McDougall explains, “and she passed away a year later.”
Without Edie there, Jesse and Caroline — the fourth generation — took on the responsibility of managing the land. They didn’t know much about farming (though Caroline had followed Edie around as a child), but they did know one thing: They weren’t willing to spray a single more ounce of the chemicals that had contributed to Edie’s cancer.
Transitioning to Regenerative Management
“We were so scared of the cancer that we saw take Edie that we stopped spraying anything and everything on the land and ‘went organic,’” Jesse recalls. “But we discovered the following spring, in 2013, that kicking the crutch out from a conventional production system really doesn’t lead to abundant growth. It led to collapse. All our fields that had been most recently sprayed weren’t growing anything. They were desertifying. That was the collapse that started our adventure in regeneration.”
Desperate for input on how to put the pieces of a broken system back together, the McDougalls stumbled upon Allan Savory’s work and the principles of Holistic Management — using animals and rotational grazing to build soil and breathe new life back into degraded ecosystems. “We were skeptical,” Jesse admits, “but we experimented with it and quickly learned the power of it in terms of regenerating the ecosystem.”
Unfortunately, regeneration is not an immediate process, and because the farm’s biological systems had been disrupted with synthetic chemicals for nearly half a century, Studio Hill’s carrying capacity was a measly one sheep-per-acre. Not nearly enough to live on. If the McDougalls were going to really commit to making agriculture work on the family farm once again, they needed something to bridge the gap.
The Schoolhouse Airbnb — “You Can’t Turn That Off”
At the same time that they began the process of restoring the farm’s biology, Jesse and Caroline were also renovating a late 19th-century schoolhouse on the property, which they hoped to make their family home. The schoolhouse hadn’t been updated for nearly 70 years, and though they did much of the work themselves, the cost of the repairs still put them in a financial crunch. As a temporary measure to repay construction costs, “We put it on Airbnb,” Jesse remembers, “just kind of on a whim to see if we could earn back the money.”
The Schoolhouse immediately booked up for the entire next year. “We were blown away by the demand for it,” Jesse says. “Then it became an issue of, well, there’s no good time to ever turn off that revenue stream, so we couldn’t move into it.” The remodel was completed in 2016. Since making the house available online in 2017, “We’ve been having 200% year-over-year growth in terms of what we can get for nightly rate and bookings per year,” Jesse explains. “When we crossed into 2021, on January 1st we had booked every single night of 2021 in the house. You can’t turn that off.”
Every Farm Has “Something Else”
“I like to put it like this,” Jesse prepares to explain a familiar argument for why hospitality has a place on the farm. “Every farm has something else to support the slim earnings or losses on farming. Right now food margins are so slim, especially on small family farms where the perfect efficiencies aren’t possible, and especially in Vermont where the landscape isn’t efficient. It is just a law of physics that we cannot produce food more cheaply than a farm in the Midwest that has 10,000 acres, three employees, and a GPS-controlled tractor. If we have 10,000 acres here in Vermont, it’s spread out over 200 fields and 60 square miles. So we can’t bring our production costs down low enough to compete with what’s being trucked into the area every day.”
But the reality is, this land must be farmed. Without active production, property taxes spike beyond the reach of most residents, which causes families to lose the land they have stewarded for generations. So they keep farming, even if the farm is hemorrhaging money. They just have to make it up in other ways so they don’t lose their home.
Jesse brings up the blunt truth of a bumper sticker that’s popular in rural Vermont: “Behind every successful farmer, there’s a wife who works in town.” Recently in the US, off-farm work has been the “something else” keeping family farms afloat. “We have something else as well,” Jesse notes, “but it happens to be the Airbnb and the hospitality. It brings customers to our doorstep. It brings in money from out of state. It allows us, most importantly, to stay on the land all day. Which means we can steward it and tend it the way it needs to be tended. We can be out with the sheep, or the chickens. We can be out making hay while that farm stay is earning us money.”
Surviving the lean, early years of biological transition would not have been possible at Studio Hill without the hospitality income. “The revenue from the farm stay business and the fact that that business allowed us to stay on the farm has been the key to our transition to regenerative agriculture,” Jesse confirms. “We would not have been able to do what we did, regenerating the ecosystem, rebuilding the soil and bringing back the biodiversity. All that work that needed to be done in terms of just sitting down thinking, planning, learning, moving animals every day — that wouldn’t have gotten done if I or my wife had to drive into town and sit at a desk…The farming is reinforcing the Airbnb and the Airbnb is reinforcing the farming.”
No Funding For Small Farms
But just because on-farm hospitality makes fiscal sense, doesn’t mean getting started is easy. “There’s no money out there for small farms.” Jesse is adamant. “There’s no money. The USDA programs that we’ve found are all targeted toward quantity, not quality. So if you are cranking out a lot of X,Y, or Z, they have the models in their spreadsheet to figure out what they can lend against that. But if you’re diversified and you are trying to build a holistic system that has a whole bunch of interworking parts, that has some resiliency in it, they don’t have models for that. They can’t figure out what the hell you’re doing.”
Unable to access adequate financing through the normal agricultural lenders, the McDougalls explored traditional finance. “When we have looked for financing, we’ve been dismissed out of hand as an agricultural enterprise,” Jesse explains. “Banks just say, ‘Oh, we don’t lend to farms. Sorry we don’t get into agriculture.’ I’ve heard that a number of times.”
Because he already knew the response, when the opportunity arose in 2021 to purchase the properties neighboring Studio Hill to the north and south — which would add 75 acres of agricultural space to the farm, including three more houses for farm stays — Jesse didn’t even try to make an agricultural case for funding. “When the opportunity came up to buy those properties, I didn’t even think about agriculture because I knew they wouldn’t look at it. I wrote a business plan based on the farm stay business and took that to the banks. I said ‘Listen, we’ve been growing 200% every year in the Schoolhouse. We want to add this house to it. We want to add this house to it. Here’s the business plan and here’s how we get to profitability.’”
The McDougalls took their proposal to the local bank they already had a relationship with for their personal mortgage and car loan. “They came out and toured the properties,” Jesse recalls. “The individuals that I worked with were very encouraging. They said, ‘Everything looks great. You’ve proven that it’s working. You’re going to be totally successful.’ Then we went to the underwriters and they said, ‘Nope, we’re not going to fund you.’ Because it was too risky for them. And I don’t know why. But that’s what I got. ‘You’re going to do it. We’re not going to help you.’ Which was very discouraging.”
Partnership With Steward
After another rejection. Jesse and Caroline stumbled across Steward. “We threw the business plan their way, added the agriculture back in because that’s why we’re here. And they could see it. They said, ‘This is a no-brainer. Let’s do it.’ They said ‘yes’ when everybody else said ‘no,’ and changed our world.”
Finding a path to purchase the neighboring properties meant more to the McDougalls than just adding additional acreage. “We’re seeing a lot of people flee the cities right now, and they’re not always people who are familiar with the farming culture,” Jesse explains. “We’ve heard horror stories from neighbors who are now in legal fights with newcomers because people come in and have a problem with how things were. We were terrified of that. But Steward swooped in and saved the day.”
“I’m not exaggerating when I say my wife and I were just blubbering in tears of joy and appreciation when the loan came through. My mother-in-law, my father-in-law, my uncle-in-law — people who have been working this land their whole lives — couldn’t believe that somebody would help them. They were all floored that we were able to make it happen. And none of them knew how. They said, ‘I don’t know what kind of fancy footwork you did to make this happen, but thank you.’ I’ve had to explain Steward to them a dozen or so times,” Jesse says with a laugh.
Building a New Model
Now the McDougalls aren’t just trying to keep Studio Hill afloat; they’re changing their regional farm economy to make human-scale farming work for the long run. “We’re trying to build revenue streams that bring money back into the area,” Jesse says.
When Caroline and Jesse took over Studio Hill, “we had three incomes coming in from off the farm to support the whole thing.” But with the farm stay fueling the transition to regenerative management, things started to change. As the Airbnb gained popularity, the farm biology also began to recover. Grasses came back thicker and no longer required tillage or expensive inputs. As revenue increased (in both the field and the farm stay) and expenses decreased, the farm transitioned from a profit drain to a profit driver. “In the last 10 years, we’ve gone from three off-the-farm jobs supporting this place,” Jesse explains excitedly, “to four full-time, on-the-farm jobs being supported by this place.”
In 2019, the McDougalls co-founded the Regenerative Food Network (RFN) to develop value-added, sustainable food production throughout the region. RFN has since supported the establishment of a slaughterhouse in Wilmington, an organic tannery in Manchester, and the development of a meat finishing and food distribution facility in Bennington, all of which build local food system jobs that create real profit and keep it within the region.
Ultimately, Jesse elaborates, “We’re trying to build an economy based on regenerating soil. I think now is the time we can do it, because of the interest in regenerative ag and the hope that comes with that, which we’re seeing trickle into the marketplace now.”
Farm stays feed into this economy by establishing a positive feedback loop that McDougall calls “hope tourism.” It’s “the phenomenon that people go home and tell their friends to come see this place that’s just clouds of butterflies, clouds of birds, foxes, and coyotes, groundhogs, deer, and turkeys.” As new visitors witness the incredible beauty and productivity of agricultural regeneration at Studio Hill, they create a marketplace pipeline that feeds directly to the farm. But they also return home changed by their visit, hopefully becoming more thoughtful and discerning consumers who then support the farms and food businesses in their own community. “It’s that hope that is building a new industry of farm tourism,” Jesse explains. “Not to mention, hot tubs and saunas don’t hurt.”
At Studio Hill the positive feedback loop of on-farm hospitality has not only built a foundation of financial stability — “we’re cleaning toilets for $400/hr and thrilled to be doing it,”Jesse laughs — it has also facilitated the regeneration of the land, so the farm can ultimately be self-sustaining again. Less than 10 years of regenerative management has taken Studio Hill from an initial carrying capacity of only 100 sheep, “to now we have 220 sheep on the farm and we have no idea what the carrying capacity is,” Jesse reports. “The ceiling has been blown out of the water.”
For the McDougalls, every step of this process is future-focused. “There’s another generation coming,” Jesse says adamantly. “We view ourselves as stewards of this land, but we have to expand our definition of stewardship from what we own, to the things we care for: the community, the school, the wider natural resources of the region. I would like to see the societal expansion of stewardship — a reacceptance of the responsibility of passing on something stronger and better for our kids. I think that the whole farm tourism thing plays into that. Our job is to inspire the next generation to take on that goal. And showing people that it’s possible is step one.”
Funding All Forms of Agri-Culture
At Steward, we know that regenerative management can’t be reduced to an equation. Instead of running every potential project through the same lending criteria, our evaluation process relies on personal conversations with site managers and consultation from our Farm Steward team, which includes agrarians with decades of experience in sustainable management.
Since our founding, our commitment to prioritize quality of agricultural stewardship, regardless of setting or industry, has led us to fund not only urban farms and regenerative hemp, but also oyster beds, day-boat fisheries, value-added processing equipment, building purchases for co-ops and food hubs, and, you guessed it — even opportunities for on-farm hospitality. If your project facilitates the exceptional stewardship of your agricultural ecosystem and contributes to a sustainable and secure food system for your community, it’s agriculture. And funding the future of agriculture is what we do every day.
Learn more about our loan opportunities for your sustainable farm or food business, or become a participating lender yourself to back agrarians like the McDougalls and fuel the growth of regenerative stewardship.
“A healthy farm culture can be based only upon familiarity and can grow only among a people soundly established upon the land.” — Wendell Berry, The Unsettling of America
