Agricultural Lending

1. Agricultural Lending By: Ray Thieman Prairie Ridge Buffalo 719-775-8742

2. Sources of Ag Financing There are four basic sources of Agricultural financing. • Private Financing • Commercial Lending • Farm Credit System • Farm Service Agency

3. Private financing • If available this can be your best option as it will allow for more flexibility and less restrictions. One of the key issues in obtaining financing for buffalo is finding a lender that is familiar and comfortable with buffalo as collateral. In private financing you only have to convince yourself or usually a friend or relative that your proposal is sound and secure enough to invest. This can also be less restrictive. This can be a good source of financing in conjunction with other commercial financing providing the much needed collateral position they will require.

4. Commercial Lending • This would include banks, credit unions, credit cards etc. Banks would be the most common source of credit to the Ag sector. The first bank to contact is always your own bank. They will know you the best and are more likely to help if you have a history with them. The problem is that more and more banks are moving away from Ag lending. You may have to go out of your area to find a bank that would do Ag financing. When applying for a loan you need to have done your homework. When you present a plan to your bank have it supported with realist projections including a solid marketing plan. The first impression will be the lasting one. If you are shooting in the dark it will be apparent and your success unlikely.

5. Farm Credit System • This would be the Federal Land Bank or Production Credit System. They are found in all rural areas and are exclusively involved in Ag Credit. They are not part of the government although there is some oversight They are producer owned so can provide better rates and terms on real estate loans and have a complete portfolio of real estate and operating type loans. With their total involvement being in Ag lending they will have a good understanding of what you want to accomplish.

6. Farm Service Agency • This is an agency of the U.S. Government that provides assistance and support to farmers. Within FSA there will be the farm loan department and they will have representation in each county throughout the U.S. They are able to make direct loans to farmers or work with a commercial lender in providing guaranteed loans. This will allow lenders to make loans that they are not completely comfortable with due to risk or uncertainty since the loan is backed by FSA. The major advantage to FSA is that they can make loan with little or no equity and are designed to help new farmers and ranchers get into the business of Agriculture. The drawbacks are that you must meet certain eligibility requirements and they have limited funding.

7. Summary • When developing your operating plan, be creative in your approach to obtaining financing. Look at the possibility of using more than one source to provide the best plan.

8. In my own operation I use all of the mentioned sources, except for FSA, since I would not meet their eligibility requirements. • I have my real estate with Farm Credit and my Operating with a local commercial lender. • I use balance transfers on credit cards to lower my overall interest rate, and utilize funds from my parents to improve my equity position and provide them with a better return on their money. Note: If you use balance transfers on credit cards be sure and keep enough room on your line of credit to pay them off. Their rates are subject to increase and the new rates can put them at a disadvantage. They should only be used to lower interest rates not as a source of credit.

9. Be Creative, Adventurous and Persistent in researching all financial possibilities.