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9 Pieces of Advice for Farmers from Experienced Agriculture Lenders

farmers shaking hands in sunflower field at sunset

9 Pieces of Advice for Farmers from Experienced Agriculture Lenders

Whether you’re an experienced, young, beginning, or small farmer, chances are you’re going to need some level of financing during your career. We’ve been financing agriculture for over 100 years and have compiled the best advice for farmers from our most seasoned loan officers. Between them, they have over 159 years of agricultural lending experience and have seen a thing or two about what it takes to run a successful operation. 

“Being a good equipment operator or a capable producer alone is just the beginning.”

American agriculture may be a lifestyle, but at its core it’s a business. Successful farmers today have become expert financial managers, handling the production side of their business as well as:  bookkeeping, commodity marketing, crop insurance, government regulation, USDA programs, legal liability, labor regulations, tax liability to name a few. Being a good equipment operator or a capable producer alone is just the beginning.  It is important for young or beginning farmers to develop these skills as they begin their journey. For these reasons, having a relationship with a lender that is dedicated to serving agriculture can be a big help. - Jon Harris, 21 Years of Ag Lending Experience

“It is so important to have equity in your crop and manageable fixed costs.”

Always do an annual review of your financials, specifically as to liquidity and fixed costs. Do you have extremely high liquidity but also high fixed costs?  If so, adjust. Do you have good equity and low fixed costs but no liquidity?  Adjust. It is so important to have equity in your crop and manageable fixed costs.  This is the key to maintaining a successful farming operation long term. - Rodney Fowler, 15 Years of Ag Lending Experience

“Enjoy what you do but treat it as any other business where a profit must be made to survive.”

Be conservative.  The goal is to make a profit each year.  Profit margins are very thin, so lock in prices when at profitable levels. The ag market is extremely volatile, and you should never expect to sell on peaks in the market. Enjoy what you do but treat it as any other business where a profit must be made to survive. - John Till, 19 Years of Ag Lending Experience

“If it makes cents, it makes sense.”

Let your lender know how this loan request will help you become more profitable or hit growth goals you have. Fill out your balance sheet every year so you can see and understand where your short comings are. That way you can make plans to resolve them. Good record keeping isn’t just tax returns and weight tickets on the dash of your truck. The more detailed records you keep the easier it is for us to understand your operation and help you. - Jonathan Barnes, 23 Years of Ag Lending Experience

[WATCH: How to Complete a Balance Sheet That Will Wow Lenders]

"Make sure you have your farm plan written out.”

When coming to speak with a lender about your operating needs you should know what your crop plan will consist of and a good idea of the cost involved. To help move your loan request faster through the process the lender will need to know what your projected farm plan will look like. That is, how many acres of each crop will be grown, what are your expected yields, and how much money do you anticipate in gross income from each commodity. Additionally, the previous year yields and selling prices will also be needed. Most seasoned farmers will know this information and will be able to dictate it to the lender.  Also, when completing your annual personal financial statement always remember to update your current assets and liabilities. Oftentimes, items on hand that have recently been purchased or assets that are waiting to be sold are excluded from the balance sheet.  As always, we will help compile this information if needed. - Chad Guthrie, 8 Years of Ag Lending Experience

“It’s imperative to understand your financial statements in order to make important farm decisions.”

From my experience, I see a strong correlation between properly compiled financial statements and a successful business. Farming is a business. It is imperative to produce reliable financial statements and even more important to understand and utilize them when making the multitude of decisions that come with managing a farm. Understanding your historical financial information will help tremendously with annual farm plans and long-term decisions.  It will assist in making better marketing decisions, managing input costs, and structuring your term debts.  –  Allen Daley, 16 Years of Ag Lending Experience

“Don’t feel like you are bothering your lender - CALL them!”

Communication is key to any relationship especially with your lender. It’s our job to talk to customers. If you know things are going to be tight in the fall, go ahead and give us a call to discuss options. I promise we will work with you. The last thing we want to do is collect and sell collateral. We are in the business of “renting money” and we will bend over backwards to not be in the collateral selling business.  – Dewey Newton, 28 Years of Ag Lending Experience

“If a farmer does not have the time or feel comfortable keeping their records, I encourage them to find a good accountant or record keeping service to help them with that task.”

The best advice I would give any farmer is to keep good financial and farm records for their farming operation. I look at a lot of farm operations throughout the year, the most successful ones are the ones that keep really good farm records. Good record keeping can help a famer increase their profits and help keep them from making a financial mistake that could keep them from being profitable that year. I encourage all my farmers to maintain good farm records, so they can look at input cost throughout the year to see where their dollars are going. It also helps their lenders and accountants when it is time to use their services. If a farmer does not have the time or feel comfortable keeping their records, I encourage them to find a good accountant or record keeping service to help them with that task. – Ricky Varnadoe 18 years of Ag Lending Experience

[READ: Record Keeping Can Help Make Your Farm Successful Now]

“Keeping accurate records will help us help you avoid common struggles we see facing farmers.”

The best advice I can give a farmer is to keep accurate and up to date records. The financial information that farmers provide us with is only as good as what is provided by them.  Having up to date records and financial information makes underwriting loans much easier for AgSouth and allows for a much faster turnaround time with the loan request as it takes out guesswork.  It also allows AgSouth to give farmers meaningful feedback about their farming operation.  With accurate and up to date financial records AgSouth can also help identify strengths and weaknesses to avoid common struggles and hassles facing farmers. – Clay Clifton, 11 Years of Ag Lending Experience


Need Help With Your Farm Finances?

Visit our Farm Education page for more resources and downloads to help get your farm finances on track. On the webpage you’ll find things like:

  • Cash flow budget spreadsheet
  • Balance sheet and income statement spreadsheet
  • Enterprise budget worksheet
  • One page business plan worksheet

Additionally, we hold an award-winning farm finance workshop called AGAware every summer. Visit www.agsouthfc.com/agaware for more information.