Running an Ag business takes expertise, hard work, and money. If any of these variables is missing, you’re going to have a hard time.
Expertise can be taught. Hard work can be learned.
Money is a barrier to entry for many who may have the expertise and work ethic to do the job. Unless you have financial backing that puts equipment, supplies, and operations within manageable reach, you will have to pursue lending options. As you move your Ag business into a new year, consider these thoughts about financing solutions for your farm.
In order to do a job right, you need the right equipment. The Ag business is no exception. The equipment you need to successfully do your job is highly specialized, and highly-specialized equipment costs money. With slim margins and volatile conditions impacting profits, you can’t afford waste or inefficiencies in your Ag operation. You need to make sure you’re using the right equipment for the job in front of you, and you need to know that the money you spend is going to help you create success. It takes intentional planning and management.
Make sure to appropriately estimate your machinery costs. Check out this article from Iowa State University on effectively determining and managing farming equipment costs.
Once you know what equipment will cost you to purchase or lease, operate, maintain, and insure, you’ll be able to borrow the right amount of money to support your operation.
In this industry, cash flow is seasonal. Waiting for the harvest means that you won’t necessarily receive income for months at a time. Add to that the volatility from factors like the economy and the weather, and financing solutions can be the difference between a sustainable year-round business and a source of anxiety and uncertainty.
As you consider whether an operating loan is right for your business, consider that a loan this year doesn’t necessarily mean you’ll need one next year. It could simply be a bridge to get you through a particularly lean season. It could be a source of stability as you pivot your operation or recover from a storm. It could be a crop input loan that sows for the next season of your business.
Sometimes lending solutions for Ag businesses are to help farmers grow what’s already healthy. Whether it’s time to expand the operation, purchase more land, or upgrade facilities, an Ag loan can be the capital you need to move strategically ahead.
Be sure you’re working with a lending expert who understands the nuances of the Ag business. Your business isn’t like others’. Your ability to find the right lender, borrow the right amount of money, and appropriately allocate and manage the money you borrow will all determine your long-term viability in farming.