Financial Management

How to Get a Loan Approval: A Banker's Point of View

Tue, 18 Nov 2025 20:28:26 GMT

For most farmers, the next big project on the operation starts with a conversation with your banke, and being fully prepared before you walk into that meeting can significantly increase your chances of getting a loan approval.

Curtis Gerrits, senior lending specialist at Compeer Financial, has spent years helping producers get the financing they need. During a recent Professional Dairy Producers webinar, he shares what truly makes a loan application stand out and how farmers can set themselves up for a smoother approval process.

Get Your Financial House in Order
When preparing for a loan, Gerrits emphasizes lenders look first at clear and complete financial documentation. The process begins with the fundamentals.

“Some of the documents that are top of mind are your profit and loss statement,” he says. “Don’t just stick with the current year. Try to have access to the last three years.”

A profit and loss statement not only establishes whether a business is profitable but also helps lenders understand how the farm manages revenue and expenses over time. Gerrits encourages farmers to follow this with a current balance sheet that breaks down assets and liabilities in detail.

This balance sheet should include livestock numbers, acres owned and leased and a complete equipment list with updated values. Together, these documents paint a picture of financial health and management discipline.

For long-term planning, Gerrits stresses the importance of forward-looking projections.

“Probably one of the last things is to have a detailed projection,” he adds. “What is the business plan, and how is this going to impact your business?”

These projections help both the producer and the lender understand how an expansion, land purchase or capital improvement will affect cash flow and operational stability in the years ahead.

Details Matter
Gerrits says one of the most common pitfalls he sees is overlooking the finer points of financial reporting. Accurate and transparent records build trust and demonstrate professionalism, giving lenders greater confidence in the producer’s decision-making capacity.

“The attention to detail is probably a key thing that maybe gets overlooked from time to time,” he explains.

A lender needs to see exactly what makes up the operation’s income. This could include crop sales, livestock sales, custom work, direct-to-consumer revenue or any other streams that support the business. Clear categorization helps verify performance and gives lenders a better understanding of how the farm is managed.

Build a Strong Relationship
Beyond the numbers, Gerrits stresses the importance of working with a lender who understands the realities of farming. A loan officer familiar with agriculture can better interpret financial statements, spot trends and anticipate challenges.

“Working with a loan officer that understands your day-to-day is really important,” he says. “Having that good relationship where you can bounce ideas off of one another is a really great thing.

Gerrits also encourages producers to bring their lender onto the farm. Sometimes a walk-through can communicate more than a financial packet ever could.

“Put your boots on and take a walk through the barns and show them what you are doing and why the loan application that you are requesting is important,” he says.

Seeing the animals, the facilities and the workflow helps lenders fully understand the operation’s strengths and opportunities, and it gives them greater clarity when evaluating a loan request.

Be Honest About Tough Years
Producers should not shy away from acknowledging difficult financial periods or reporting losses on taxes. Gerrits reassures farmers that losses do not automatically disqualify them from financing.

“Do not get too hung up on the losses out there,” he explains.

A balance sheet can often show how those losses are supported or offset by strong assets, such as land, livestock or equipment equity. What matters most is transparency and context. And demonstrating that you have a plan to manage challenges and leverage your assets can build confidence with your lender.

Plan for the Future
Constant communication with your loan officer can make a big difference in the approval process. Gerrits says checking in periodically, even with a quick touch base, helps avoid surprises.

“Maybe you’ve already talked about: ‘Hey, in a couple of months we might have something come in, and I’m going to have a request for an operating line of credit,’” he says. “That way it’s already in the back of the loan officer’s mind, and they can start preparing or gathering the right information.”

A little preparation can also greatly speed up the loan process. Gerrits recommends giving your loan officer about one month of lead time before funds are needed, along with complete financial documents.

“At the end of the year, we’ll see some borrowers who need to borrow money to do some prepaids to help their tax situation,” he says. “It’s hard to turn things around because a lot of folks are coming in at the last hour. If you give them a month’s lead time with all of the information pertinent, all the financials and balance sheets, that will just help expedite it.”

Looking further ahead, Gerrits encourages producers to think generationally and begin planning for succession well before retirement becomes imminent.

“It is never too early to start a succession plan,” he says.

Early planning gives the next generation clarity about future roles and expectations, helping them prepare financially and personally for the responsibilities that lie ahead.

Own Your Numbers
Ultimately, Gerrits believes successful borrowers take responsibility for knowing and understanding every aspect of their financial position.

“Know your numbers first,” he says. “Don’t just rely on your loan officer to tell you how you are doing.”

Throughout the loan process, preparation and transparency go a long way. Clear financials, attention to detail and regular communication help your lender understand your goals, while on-farm conversations and honest discussions build trust. Being organized, consistent and informed does more than streamline an application, it helps you make better decisions, catch issues early and keep the operation moving in the right direction.

The Best Time to Start Your Retirement Plan

Mon, 09 Jun 2025 17:25:09 GMT

Farmers historically have struggled to invest money in anything other than their farm operation. However, by investing in retirement plans including an IRA, a farmer can more easily save up for retirement and make the transfer to the next generation much easier.

The power of compounding is the financial seventh wonder of the world. Based on your annual investment return, you can determine how quickly your investment will double by dividing it into 72. For example, if you average 3% on your money, it will take 24 years to double. However, if you can earn 8%, then it only takes nine years.

The younger you start to invest, even small sums, the more money you will have at retirement. Let’s compare the results of placing $10,000 into a retirement account at either age 20 or 40.

The farmer who does this at age 40 and then pulls the money out at age 70 will have $100,627. However, the farmer who starts at age 20 will have $469,016, and if they can earn 10%, will have $1,173,909.

The cost of maintaining a solo 401k plan is very inexpensive and married couples can set aside at least $14,000 into an IRA each year. The fees on those accounts are minimal and you can make sure to invest in low-cost ETFs or mutual funds. High-cost funds could quickly reduce your returns substantially.

Most of the earnings will result in the last 10 years, so the sooner you get started, the more funds you will accumulate.

Risk Protection Benefits
There’s another big reason to make this investment. Funds in a retirement plan are fully exempt from bankruptcy, and we all know farming can be a very risky business. The full exemption does not apply to IRAs, but the amount that is exempt is fairly large.

This amount gets updated every three years. On April 1, 2025, the exemption amount was raised from $1,512,350 to $1,711.975 through March 31, 2028.

Most farmers have IRAs less than this amount, so it’s likely they will have a full exclusion if bankruptcy was to occur. Amounts rolled over from a 401k plan or other retirement account, including earnings associated on that account, are fully exempt.

In some states, IRAs are fully exempt or at least partially exempt.

The bottom line is to invest in an IRA or retirement plan. I hope you never need the protection, but it is a good insurance policy.

Advice From a Rural Banker: How to Navigate Today’s Uncertainty

Thu, 15 May 2025 14:44:31 GMT

What is top of farmers’ minds as they manage their business today? John Steeves, head of rural banking for Rabobank, says in his recent on-farm visits, he sums it up as three things:

Cost structure: continued high inputs, particularly equipment
Availability of quality labor
Uncertainty in the market: access to foreign markets, tariffs and cross border supply chains

“Uncertainty is the only certainty,” he says. “In times of volatility, I always say cash is king. I would encourage farmers and ranchers to kind of focus on the cash position or access to cash and liquidity, whether that be liquidity on operating lines, or cash on the side. Whatever your case might be, it’s about how to help absorb potential unforeseen shocks and potential short term losses if they occur.”

Steeves points to Rabo analysis showing for the foreseeable future a 75% chance corn will remain under $5 and a 75% chance soybeans will remain under $11.

“This is creating challenges for our farming clients, for sure,” Steeves says. “This year more than ever, farmers should put a particular focus on cash flow and liquidity, set up for long term success and set up for any unforeseen shocks.”

When looking at the general farm lending landscape, Steeves says farm businesses are ready to face those challenges.

“Farmers and ranchers are good at this—have a plan, plan to manage your business, and hedge your risk,” he says. “I classify it as still good liquidity in the market, which is great for farmers, whether it be on the G&O side, cattle and other animal proteins. I think there’s still good access to capital, which is great. At the same time, we have heard rumblings in the market that some of our some lenders are pulling back.”

Steeves says now is a good time for farmers to engage with their banker and financial relationships.

“Review your plan with your financial partner, and actively engage in discussions about what the opportunities are,” he says.

Steeves shares more on the Top Producer Podcast with Paul Neiffer:

USDA: Family Farms Still Dominate A Majority of U.S. Farms

Fri, 13 Dec 2024 15:43:01 GMT

Here are eight takeaways illustrating the landscape of U.S. farm productivity and financial resources.

Released on Dec. 10, USDA-ERS published its 2024 edition of America’s Farms and Ranches at a Glance . This publication, which pulls from survey data collected at the end of 2023, aims to give a snapshot of the U.S. farm economy.

Takeaway 1: In total, family farms accounted for about 96% of total farms and 83% of total production in 2023.

A big part of the study breaks down different characteristics of farms by type. The first differentiation is between family farms and non-family farms. Per the USDA, a family farm is a farm in which the majority of the business is owned by an operator and/or any individual related by blood, marriage, or adoption, including relatives who do not live in the operator’s household.

Among family farms, farms are divided by farm size measured by gross cash farm income (GCFI).

Most U.S. farms (86%) are small family farms (GCFI less than $350,000); these farms operate on 41% of U.S. agricultural land and account for 17% of the total value of production
Midsize family farms (GCFI between $350,000 and $999,999) accounted for 18% of agricultural land and 18% of the total value of production.
Large-scale family farms (GCFI of $1,000,000 or more) accounted for 48% of the total value of production and 31% of agricultural land in 2023.
GCFI includes sales of crops and livestock, government payments, other farm related income, and fees received by operators from production contracts.

Takeaway 2: Large-scale family farms dominate the production of many selected commodities

Large-scale family farms accounted for the majority of the value of cash grains and soybeans (52%), cotton (71%), dairy (77%), and specialty crops (59%) production
Small family farms produced 45% of the value of hay and 46% of the total value of U.S. poultry and egg output
22% of the value of beef production occurred on small family farms, while 39% occurred on large-scale family farms. Small family farms often have cow-calf operations, while large-scale family farms are more likely to operate feedlots
Compared with 2022, nonfamily farms comprised a larger share of the value of production, with their value of beef production increasing from 11% in 2022 to 26% in 2023.

Takeaway 3: Small family farms and non-family farms are potentially more financially vulnerable.

The data in this report was collected when net cash income was above the 10-year average. USDA measures financial performance by operating profit margin (OPM), with a noted high-risk zone of less than 10 OPM.

In 2023, between 52 and 85% of small family farms, depending on the farm type (retirement, off-farm occupation, low sales, moderate sales), had an OPM in the high-risk zone.
Around 53% of nonfamily farms had an OPM in the high-risk zone.

Takeaway 4: Use of credit and loans is an important resource for all farms.

The share of farms (28%) using credit in 2023 was lower than the previous 10-year average of 31%.
Within every type of farm, on average, 80% or more of debt came from traditional lending sources, including the Farm Credit System, USDA, FSA, and commercial banks, compared with trade credit or other sources.

Takeaway 5: Less than one-quarter of farms use government payment programs.

The percentage of farms receiving government payments ranged from 21% for small family farms to 44% for midsize and large family farms.
Small family farms received 76% of all payments from USDA’s Conservation Reserve Program (CRP)
41% of all USDA, Natural Resources Conservation Service (NRCS) working lands program payments were received by small family farms, which includes Environmental Quality Incentives Program (EQIP) and Conservation Stewardship Program (CSP).
Midsized and large-scale family farms accounted for 66% of the total value of production and received 71% of countercyclical-type payments, which include Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) and 61% of all other payments, which include Dairy Margin Coverage, agricultural disaster, and ad-hoc payments

Takeaway 6: 16% of farms participated in federal crop insurance programs. This is a slight increase from 14% in 2022.

66% of farms producing row crops (cotton, corn, soybeans, wheat, peanuts, rice, or sorghum) purchased Federal crop insurance.
17% of farms growing specialty crops, such as fruits, vegetables, and nursery crops, and 12% of farms producing livestock purchased Federal crop insurance.

Takeaway 7: Many farms rely on off-farm income.

Most (85%) of all U.S. farm households earned the majority of their total household income from off-farm sources
52% of family farm households had negative farming income
Overall, 42% of farm households have income below the US median in 2023.

Takeaway 8: New insights on unpriced stored grain highlight the risk management tool.

For the first time, the study asked about unpriced stored corn, soybeans and wheat.

The largest volumes were in post-harvest months.
The average share of total stocks as of December 2023 that was unpriced was 38.6% for corn, 32.9% for soybeans, and 20.4% for wheat
Unpriced off farm storage is less commonly used

Click here for the full report from USDA-ERS

We Might Not Like It, But We Need to Evaluate Overheads

Tue, 05 Nov 2024 15:25:30 GMT

Cattle prices in 2023 and 2024 have ranged from good to great depending on if your glass is half empty or half full. Adding to this, feed grains have been getting progressively cheaper since the start of 2023. And finally, Oklahoma has put together two productive hay seasons back-to-back. Cheaper feed and hay along with strong calf and cull prices all pave the way for some profitable years (keeping our fingers crossed that the drought conditions are short lived).

Yet, as I have traveled to talk to livestock groups across the state it hasn’t felt as rosy as one would have thought in 2018, for example. A phrase I hear repeatedly is that it just costs more to do business than it ever has. That is something we can all agree on; it seems to cost more to do everything these days. If we subtract these earlier mentioned issues from the profit math, that leaves overhead expenses as a likely culprit for the less than rosy outlook.

Overhead costs increase since 2014.

(USDA/Beck)

Overheads have been explained in many ways. I like to describe them as all the things that we need to take care of the cattle, that don’t go into the cattle.

For example, a bale of hay is not overhead. But all the things it took to get the bale in front of the cow likely is. The tractor, baler, rake, truck, hay bed, repairs, labor, etc. are all a part of our overhead expense.

Costs that fall into the overhead category tend to not follow a normal “commodity trend.” More specifically, when we enter drought and hay supplies are already tight, we can expect hay prices to climb. We expect hay prices to stay high until we have a good hay growing season and adequate supply returns. Most overhead items don’t behave like this. They tend to have a slow but steady increase in cost over time that is corrosive to our profit margins.

Don’t get me wrong, there is a degree of overhead that is required to care for the cowherd. That will vary among ranches based on goals, labor and resource availability. Minimizing overhead costs is difficult. Just be aware that the decisions made to repair, replace or upgrade these assets will impact our profitability for many years. As the cost of these items that we need to do business with continues to increase, be especially diligent of how we can stretch each dollar a little further.

Read more:
Six Factors Affecting Farm and Ranch Profits
Recognizing Economic Ranch on the Risk on the Ranch

Secure Your Farm’s Legacy: Virtual Succession Workshop for Teams

Tue, 15 Oct 2024 16:07:03 GMT

The organizers of The DIRRT Project are ready to help farms tackle their toughest family business issues.

With both in-person attendance (in Des Moines) and for the first time ever a fully integrated online option, the upcoming event takes place Dec. 2 to 4.

The in-person event is led by experts with personalized facilitation.

The live stream offers real-time participation with the ability to ask questions and join discussions.

Register at www.thedirttproject.com

Who should attend? If any of these four challenges sound familiar, The DIRTT Project aims to help you and provide clarity.

1. “We don’t know where to start.”

“Succession planning feels overwhelming and deciding who will take over the family farm or ranch seems impossible,” says Rena Striegel, of Transition Point Advivors, who organizes the event.

2. “We have personality conflicts and dysfunction.”

“Family dynamics can be complicated, especially when it comes to discussing the future of the business,” Striegel says. “Tensions can run high, making it difficult to have productive conversations.”

3. “We’re afraid to talk about it because we don’t want to create conflict.”

Strigel says it’s common for succession planning can stir up emotions, and stakeholders may be avoiding the conversation to prevent disagreements within the family.

4. “We’ve started before, and it didn’t work.”

“Maybe you’ve tried to have these conversations in the past, but things fell apart, or decisions were never fully made. You’re left feeling stuck and unsure how to move forward,” Striegel says.

The DIRTT Project is a hands-on workshop specifically designed to help agricultural families work through the complexities of farm and ranch succession planning.

“Our program addresses not only the logistical and financial aspects of succession but also the emotional and relational challenges that come with passing the torch to the next generation,” Striegel says.

Attendees can expect to:

Create a Clear Succession Plan
Resolve Family Tensions
Encourage Honest Conversations

“The DIRRT Project is different than other farm and ranch succession planning,” Strigel says. “It doesn’t have to be overwhelming.”

She says every program is structured to give attendees the following takeaways:

Immediate Impact
Customized Solutions
Expert Guidance
Proven Results

Register at www.thedirttproject.com

Fall Finance Chores to Help Cattle Producers With Cash Flow

Wed, 04 Sep 2024 23:28:01 GMT

The scorching sun is setting on August quickly. As producers transition from running hay equipment to preparing for the winter feeding season it provides a great opportunity to catch their breath and glance at their financial condition.

Why now?

The August to September period is a prime time for a spring calving cow-calf operation to experience a cash flow issue. This can be attributed to a collection of timing and seasonal ranch operations. The first potential cause is calving and marketing season. Most operations are spring calving, then market calves in the fall. This results in most operations receiving the largest portion of their annual revenue in the fall of the previous year. They then funded any debt obligations due and purchased supplement for the cowherd last winter. Then they moved into hay season. Capital expenditures along with diesel, fertility, net wrap, repairs and maybe labor are all consuming cash.

What should producers do?

The easiest step would be to sit down and estimate ranch expenses from now until the intended time to sell calves. Then take cash balances, room on any revolving credit line, any anticipated cash inflows and add them together. Subtract the anticipated expenses from the anticipated inflows. If positive, the short-term cash position is likely adequate. If not, producers need to consider how to meet that cash need.

Calculating working capital at this point would also be helpful. Working capital is a liquidity measure and shows how effectively producers will be able to cover short-term obligations. This includes any operating costs on the horizon and any upcoming debt obligations that operations need to be ready for.

Evaluating Financial Performance and Position is a great fact sheet that discusses this in more depth.

A strong cash or working capital position allows operations to be opportunistic. Producers may be able to purchase assets (cattle, equipment, etc.) that are undervalued in the market. Furthermore, investments could be made that may yield greater profits later. Items like pasture fertility for stockpiling forage, backgrounding, or retaining ownership on calves could be examples to explore.

Avoiding the Pitfalls of Selling Sustainable Beef

Tue, 27 Aug 2024 18:16:43 GMT

Texas-based Burgundy Pasture Beef markets its products as, “100% Grass Fed. Sustainable. Wholesome.” but partner Jon Taggart says that’s a story that he can only sell one time for each customer.

“They’ll buy it once, but they won’t buy it twice if their experience with us is bad,” he says.

That story hasn’t always been the case for Taggart or for Burgundy Pasture Beef. Since they started in the mid-90’s, he says he’s “done it all in the beef industry.”

When the rising cost of inputs started seriously eating into his margins and Taggart says he realized they were “going broke spending money,” he knew a change was needed.

Their 100% grassfed operation now has beef coming off consistently throughout the year, being processed in their own USDA-inspected facility and then sold exclusively in retail stores in Grandview and neighboring metropolitan Ft. Worth and Dallas.

“There’s a market,” he says. “Obviously we’ve been successful for 25 years now.”

Recently, Taggart attended the Trust In Beef Sustainable Ranchers Tour stop in G-C Ranch to share insights from his three-decade career. Both through his lived experience and through his custom processing business, which caters to cottage producers, he has seen mistakes that can make or break cattle producers when growing, marketing, processing and selling sustainable beef.

Here are Taggart’s top tips for avoiding those pitfalls on your ranch:

Don’t Waste Your Genetics

“Once that animal leaves the ranch, your fixed costs are pretty much the same for trucking, processing, packaging and marketing,” Taggart says. “You’ve got to get as many pounds out of it as you can get.”

The money that’s spent on cattle genetics can be wasted if the cattle aren’t finished for their frame size when they leave the ranch, says Taggart.

“If you want the marbling and a decent grade, you have to give them time to take advantage of their genetics and you have to give them the resources to do it,” he adds.

Plan for the Whole Animal

According to Taggart, the pitfall that he sees most often is producers who don’t plan to sell the whole carcass.

“Somebody gets excited because a restaurant wants to buy steaks, but that’s only 15, maybe 20% of the carcass,” he says. “Then they’ll look behind them and they’ll have a pile of ground beef the size of a truck to deal with.”

First, Figure Out Your Market

Similarly, Taggart says, many producers don’t consider consumers in the equation when determining how to sell and package beef products.

“Going in, that’s the thing they need to figure out first,” he says. “It depends on the volume you want to do and your goals, and because of that, there are a lot of people selling halves, quarters, whole cows.”

It’s a very small market, considering the cost of beef these days— it’s a big investment for a consumer to fill a freezer, Taggart continues.

“Also, the consumer figures out that when they buy that whole animal, they get a lot of stuff they really don’t want,” he adds. “If they don’t have a good experience with it, they are gone forever from that market.”

(Farm Journal)

Supply Starts On-the-Ground

“Since we built our processing facility in 2004, we harvest cattle 52 weeks out of the year. We only missed one week during the freeze of 2021,” he says.

What allows Burgundy Pasture Beef to consistently produce high-quality beef? Taggart says it’s his grass.

“When you look at finishing cattle on grass, I am a huge proponent of diverse grass mixtures,” he says. “I can’t stand a monoculture.

“In order to have that constant supply, you’ve got to have a level of nutrition in your pastures that will allow you to do that,” he adds.

Taggart recommends a mix of cool season and warm season legumes, annuals and perennials.

“In a monoculture, it’s going to reach its peak of nutrition one time a year all at the same time,” he says. “You can’t maintain that gain on cattle all through the year to have the supply constant.”

Learn more about Burgundy Pasture Beef and make your plans today to attend the 2024 Trust In Beef Sustainable Ranchers Tour for more insights into how to build a more sustainable beef supply chain.

(Farm Journal)