Insights to borrowing for next-generation ranchers

Many factors go into the lending decision.

Lenders understand that most beginning operators are not bringing a super-strong balance sheet or vast land holdings to the table. A few guidelines for applying for startup loans should be followed to facilitate the loan process.

Have a plan

Having a written plan is the first and most important item. A business plan is a decision-making tool that takes the form of a formal document. It states your business goals, why you think you can achieve them and lays out your plan for doing so.

Business planning is also a process, not an end product. A ranch business plan is a work in progress which ranchers and cattle business owners or operators will want to revisit regularly. Lenders need to see that you have analyzed costs and income streams. Include any history of ranching experience and knowledge.

Having a family history of ranching lets a lender know that you have experienced the ups and downs of ranching and should expect the market fluctuations and other obstacles that may arise.

A portion of this plan should illustrate how land will be procured. Is it family land or leased land? Whichever it is will affect the cost of this prominent input cost. If possible, borrow or trade work for use of equipment.

Ranching is a long-term investment, and a three- to five-year plan should be presented.

Have a mentor

Whether this is a family member or neighbor, having someone to advise and listen to you will make things smoother. A trusted adviser is beneficial in any field. This mentor needs to be successful and accepting of change and advances in technology.

A good mentor will share a vision of what is possible and provide a road map of how to get there.

An effective mentor will provide information and advice based on your experience and ideas; encourage you to take a healthy, positive and constructive risk; be there just to listen and understand; offer honest and positive feedback; plan and think with you about how to work through a challenging or confusing situation; share different points of view to understand an issue or problem from as many different ideas and ways of thinking as possible; and make use of multiple perspectives to base decisions in choosing from the best of all the options, creating an action plan and following through with that plan.

Mention to your loan officer that you are learning from someone and are not attacking this venture on your own.

Have another job

Starting small and working for a neighboring operation not only adds experience, it adds dollars. Showing a reliable income stream outside the ranching operation will bolster a lender’s focus on cash flow. Work alongside another rancher or agricultural professional. Learning while earning is the best way to get to your dream or goal.

Take advantage of continuing education programs. Methods and technology change rapidly, and information is at our fingertips. Having an education is very important, but it is no substitute for gaining knowledge and experience from a seasoned cattle producer.

Get a co-signer

This can be a family member or someone willing to take a chance and help a new-generation rancher get a start. For generations, fathers and mothers have pledged collateral to give their children a start. A government loan guarantee can also facilitate the loan process through a traditional lender.

Find a lender that utilizes FSA or SBA loan programs. These options can provide the down payment or added collateral that make a lender more favorable to taking a chance on an inexperienced producer.

Develop an amiable yet professional relationship with your lender. You will be dealing with this person for quite some time. We as lenders want to help young producers get started, and the more comfort we have personally and professionally, the better the conversations will go.

There will be some difficult times, but creating a history and comfort level with a lender will make it smoother when those rough times arise.

Be patient and persistent

We all know the future of beef production lies at the feet of today’s up-and-comers. Lenders are there to help and want to ensure our future food sources. Come into the lender’s office with a viable plan and leave with the future in your hands.