A farm or livestock operating loan is critical for most farmers. We have witnessed rising input costs over the past several years, leading farmers and ranchers to time their purchases to get the best deal. Those purchases may require an extra boost of resources.
Operating Loan Basics
A farm or livestock operating loan is an advance of funds from a financial institution that provides funding to a farmer to pay for crop or livestock inputs in ahead of harvest or slaughter. Once the crop or livestock is sold, the borrower pays back the financial institution the principal borrowed along with interest. Some farm or livestock-related operating expenses include (but are not limited to) land rent, seed, chemical, fertilizer, feed, and veterinary care. Operating expenses can also include family living, depending on the situation.
AgCountry provides operating loans to farmers across our three-state territory. Eligibility for this type of loan is simple. AgCountry defines an eligible borrower as an individual or legal entity that is considered a full-time or part-time farmer. Our definition of a full-time farmer is an individual or legal entity owning agricultural land or engaged in the production of agricultural products, including aquatic products, under controlled conditions. A full-time farmer’s primary vocation will be farming, report farming as their primary occupation on their tax return, and/or will spend over half their time in farming activity.
A common question I get asked as a loan officer is why would you need an operating loan? Many crop and livestock vendors require at least some payment from the purchase of their input products prior to harvest or the sale of livestock. Farmers often have some cash available (working capital) to finance input costs. Depending on the farm size, crops planted, livestock raised, and cost of inputs, many producers may still need additional funds. This is where your operating loan comes into play; we help cover the difference.
Two follow up questions I get are how do you know the amount you may need and how much will AgCountry borrow? Both are great questions. AgCountry loan officers and credit staff pride ourselves on the industry knowledge and general guidance we provide to our farmers. We are well trained in putting together many different types of financials including balance sheets and projections. A general rule of thumb is that AgCountry provides a percentage of the total crop inputs, up to 75% of the collateral provided for crop and livestock operating loans.
YBF Support
Collateral can be a challenge for producers who are younger or just getting started in farming and ranching. An operating loan can provide the resources necessary. AgCountry offers a specific program designed to help young and beginning farmers or ranchers. Those qualifying for AgCountry’s Starting Gate program include producers that are 35 years or younger or have been farming for 10 years or less. Many standard traditional loan to value and equity credit standards are relaxed to accommodate weaker collateral or owner equity positions. Qualifying YBF borrowers can access our best rates and receive additional incentives towards furthering their agricultural education. The key factor is that the borrower must show high character, demonstrate trustworthiness, be cooperative, and motivated to succeed.
Operating loans provide critical funding for farmers and ranchers to cover their upfront costs and capitalize on the timing of their purchases. AgCountry is committed to helping farmers and ranchers succeed by providing the financial support they need. We have specific tools designed to allow us better opportunities to work with farmers of all sizes and experience levels, including our Starting Gate program for young or beginning farmers and ranchers.
Contact your local AgCountry office to learn how an operating loan can help you achieve your operation’s financial goals.
