BUYING FARMLAND? HERE ARE THREE TIPS TO GET IT FINANCED
Financial awareness and adaptability are important to ag lenders.
In a challenging marketplace like the one grain farmers have faced in the last few years, expanding an operation by adding acres can be tough, especially for young or less-established farmers. Even when markets are more bullish, competition can keep some buyers on the sideline when a nearby 40-, 80- or quarter-section of farmland becomes available.
No matter the dynamics at play, there are ways farmers and ranchers can position themselves best when working to secure more land. Financing is obviously foundational to buying land, and by having the right information at your fingertips — and more importantly, at your ag lender’s fingertips — you can put yourself where you need to be so you can quickly jump on the next sale, and ultimately add to your land base.
Here’s how to prepare:
- Know where you stand today.
Preparedness begins with knowing where you stand today financially. When approaching a lender, being able to articulate your current financial standing through prepared balance sheets and financial statements will help create confidence that you are a strong financial partner. Even if your finances don’t exactly align with the land purchase you’re considering, a good ag lender can suggest ways to improve your financial standing, so you’re better prepared the next time a parcel of land is on the market you want to purchase.
- Have a good idea of where you’ll be tomorrow.
No one has a crystal ball, and there’s a lot of unpredictability in today’s ag marketplace, but tallying up your operation’s projected capacity in the next year is another prerequisite to securing farm land financing. Specifically, know your expected cash flow based on your current financial position, as well as how you’ll budget based on cash flow generated by sales as part of a carefully thought-out marketing plan.
- Be willing and able to adapt.
Are you adaptable to changing market conditions, especially in times of high volatility? This ability to adjust to market changes is a major component of strong business management on which lenders place a lot of value in evaluating your reliability as a borrower. While you won’t have much influence on macroeconomic changes, a key trait that lenders look for is the ability to listen to advice and overcome the “we’ve always done it this way and we’ll continue to do it this way” mindset.
Listen to those you trust
Often, successful borrowers are able to make key adjustments to their operations on a year-in and year-out basis, thereby ensuring they stay ahead of any potential market changes that could adversely affect financial viability down the road. They’re also more apt to be open to the advice of their trusted advisers, including lenders, marketing specialists, agronomists and others.
If you’re ready to make your next land purchase and have questions whether you’re prepared to make it work, start the process by contacting a Conterra Ag Capital lending specialist today.