“There was tremendous impact from the drought last year, just in terms of people needing some more operating money,” Tom Cox, senior vice president for sales and marketing at Farm Credit Services of Western Arkansas, told Ozarks Farm & Neighbor. “Probably one of the biggest things that we saw would be people having to sell cows, and liquidate some of their herd, just in order to survive.” Other producers did not take advantage of the selloff to expand, he said, because “they didn’t know when it was going to rain again.”
But with the recovery of the weather, producers can again begin to think about expanding their operations; they may want to add cattle, land or machinery. Or they may change their marketing cycles; Cox noted producers may want to hold on to their calves to background them, or in some cases even feed them out. They may also want to grow their herd so they can get a better price by selling larger packages of cattle at regional stockyards.
Farm Credit, he said, assesses the creditworthiness of potential borrowers in several ways. There are credit scores; the lender will also assess the applicant’s financial position – “Where you’ve been, where you’re at and where you want to go, from a balance sheet standpoint,” he said. Then, of course, the applicant has to demonstrate the ability to generate enough cash to repay the loan, and be able to provide “adequate collateral, in terms of a margin – some skin in the game.”
Wesley Tucker, University of Missouri Extension west-central region Agribusiness specialist at the Polk County office in Bolivar, said with seesawing cattle and input prices, banks are requiring more collateral than they did a few years ago. “There’s still money out there for farmers to expand,” he told OFN, but “it may not be quite as easy for someone with bad credit or no collateral to walk into a bank and get money.”
He recommended bringing plenty of documentation when you visit the lender. “You need a well thought out plan – ‘This is what I need financing for, and this is how I will pay it back.’ You’re going to need your balance sheet that shows what assets and liabilities you have. You’re probably going to need some previous history on your income tax statements, such as your Schedule F, as well as your off-farm income. And a business plan; most farmers probably don’t think about doing a business plan, but a short business plan that outlines, ‘This is my operation, and this is why I will be successful,’ can go a long ways to showing your repayment ability.”
Cox added there is room for beginning farmers, defined as those who have not been in the business for at least 10 years, in the Farm Credit System.
