Business Planning Key to Loans

	Jason Penner, a Butterfield, Minn., hog producer, received support from the SARE-funded Land Stewardship Project to enroll in a record-keeping and farm analysis course. Better record-keeping was a key need identified for bankers in an LSP survey. Photo by Brian DeVore.

Bankers Say Better Farm Records Improve Chances for Loans

Farmers seeking financing for new ventures would fare better if they approached bankers with well-crafted business plans and good records, according to a survey of close to 1,600 bankers, farmers, and agricultural educators in Minnesota and Wisconsin. Today, just one applicant in six prepares the plans they consider integral to a solid loan application, bankers told the Land Stewardship Project (LSP), the SARE-funded organization that coordinated a multi-partner effort to develop, distribute, and analyze the surveys.

To quantify the perceived gulf between creditors and farmers trying alternative enterprises, LSP designed three surveys for lenders, farmers, and agricultural educators and held roundtable discussions. Results confirmed lender needs for “smart” record-keeping that includes 3 or more years of financial statements. For their part, farmers acknowledged what they see as a lack of lender understanding about alternative enterprises, a problem for at least one-half of respondents who said they rely on local banks.

“If you’re coming in with an out-of-the-ordinary idea that will be unfamiliar at best to a lender, it behooves you to bring in something that’s familiar to a lender,” said Caroline van Schaik, the LSP coordinator of the farm credit project. “Numbers are it.”

Following up on the survey results, LSP obtained another SARE grant to run business planning workshops for farmers, offer scholarships for record-keeping classes, and reach out to lenders. The workshops featured Building a Sustainable Business, a guide co-published by SARE’s Sustainable Agriculture Network and the Minnesota Institute for Sustainable Agriculture in 2003.

The surveys opened up an important dialog between groups that have often been at odds, van Schaik said. The surveys “substantiate the conversation and put it on the table where it might not otherwise be,” she said.

Similar conversations took place in Ohio. At the request of Ohio farmers, many of whom are trying new ventures like grass-based dairying and direct-market vegetables, Innovative Farmers of Ohio—armed with a SARE professional development grant—hosted training sessions for lenders about alternative farming systems. Four sessions that attracted more than 100 Ohio lenders to seminars in Ottawa, Wayne, and Holmes Counties sought to transform skepticism about financing diverse agricultural enterprises to optimism that such ventures foster community development.

Innovative workshops included farmer presenters who laid bare their finances. “Farmers were saying they have a hard time with ag lenders understanding their systems,” said Laura Ann Bergman, IFO director. “We tried to really engage in a dialog with lenders.”

[For more information, go to www.sare.org/projects and search for LNC00-200, ENC03-07,and ENC02-067.]

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