Most start-up businesses require more cash than a business owner has on hand. This applies to both farmers and ranchers who need access to land, equipment, seeds, and other materials, and if you have not done your research, there is a good chance that this debt can affect your ability to thrive in agriculture. For example, if your goal is to start drawing from a significant income from your farm in the next five years, you need to plan for fast growth, requiring higher capital investments upfront.
It is difficult to truly grasp the role that debt and financing play in the world of modern agriculture, but it is essential to try to understand how it can affect your livelihood. Being successful in the agricultural industry is understanding how to structure debt as a tool for growth. At Welch State Bank, we find this more information to be more critical in 2021 than we ever have before. We feel this way because, despite lower interest rates, the increased demand for rural land and farm mortgage loans means that understanding how the ag lending process works is key.
The Current Agricultural Lending Process
There are several ways that financing farm operations or investing in agricultural land can be done. You should also be aware that there are specific farm mortgage loans and plain agricultural loans. These loans cover crops, not just businesses or homes that are on the property. In addition to specific farm mortgage loans and plain agricultural loans, some states even have grants or special funds available for farms or agricultural products that are either in short supply or they are in high demand.
Furthermore, it can be different to qualify for a loan if you do not have a history of farm profits. Because of this, we want to make sure you have the tools necessary to come to the table prepared to win them over.
First, Determine How Much You Need to Finance Your Farm or Ranch
A clear business plan is an essential step for any successful entrepreneur. It will help you map out the specifics of your business and help you discover unknowns.
Know your Goals and Starting Size
When you are just starting out, it is hard to discover how much you might need to borrow to reach your goals. In turn, if you take the time to answer these questions, you should be able to find a solution to how much you might need.
What are your financial goals?
Do you have land/facilities available?
Do you have a history of demand for your crops, preferably with volume requirements/production goals?
What is your budget?
Next, Gather Documents
As you come to the table to ask for a loan, it is important to be prepared. Because of this, we decided to create a list of documents that you can prepare in advance.
Last three-years Tax Returns
Current Financial Statement. Please make sure it includes the following:
Creditor list including account numbers, contact persons, and phone numbers for any debts you currently owe. It is also wise to provide copies of your last credit card bill, monthly mortgage, etc.
Information for properties owned or leased.
Income and expense statements for a projection of a one-year period.
Then, Stop By and Let’s Talk Agriculture
We want you to be ready to move forward with your Agriculture loan request and by having all the information and documents ready to go, we can assist you best when you visit.
Welch State Bank and the Farm Service Agency
Farm financing through Welch includes loan programs from the USDA Farm Service Agency (FSA). These loan programs allow for access to a variety of lending and credit solutions for smaller farmers and ranchers to get access to funds that they need. We utilize FSA guarantees and participation loans which help us meet the credit needs of young, beginning, and small farmers as well as existing farmers seeking to expand their operations. These programs are not available to everyone everywhere, but here at Welch, we are honored to be one of the few Oklahoma banks to have attained the Farm Service Agency “preferred lenders” accreditation.
We also offer operating loans with options such as single maturity, revolving lines of credit, or even conventional working capital loans with level amortized payments. We focus on YOUR needs thorough out the process.
We understand you have your choice of agricultural lenders, and we want you to know that when you choose Welch State Bank for your ag loan, you know that you have a team of individuals behind you that are ready to help you throughout the life of the loan, not just in the initial stages. Since the early 1970’s we have taken great pride in our commitment to working on behalf of farmers and ranchers who are fed up with the traditional farmer vs bank relationship. This effort on our end to ensure we handle the financial process allows you to focus on managing and growing your farm.
Our agricultural officers are farmers and ranchers themselves and are ready to help you. Contact us today!