Ag background keeps lender grounded
Brian Field says his lending company is basically an extension of the FFA project he started as a high schooler.
While making commercial agricultural mortgages may not outwardly bear much resemblance to his FFA experience running a custom hay harvesting business, Field said it also taught him the fundamentals of accounting, organization and investing.
He and his brother started the custom hay operation with borrowed equipment, expanded it over time, and were pulling in roughly $300,000 a year by the time Field was in college.
While his brother and father continued the custom hay operation, Field went to work for a cattle feedlot and then made the switch to commercial lending.
During his career, Field has made loans to squid processors, mushroom farmers, hay compressors, cattle ranchers and “everything in between,” he said.
His company, Harvest Capital, has handled about $500 million in loans to agribusinesses across six Western states since its inception more than 20 years ago.
Harvest Capital’s team of employees has the goal of providing capital to the farm industry while structuring that debt so companies are able to withstand financial ups and downs over the long term, he said.
“We look at it as the investment business, not necessarily the lending business,” Field said, noting that agricultural mortgages require expertise in the vagaries of the industry.
“It’s nothing to compare to other types of real estate lending,” he said.
Aside from seasonal fluctuations, lending to farms involves analyzing their water rights and understanding the crop and livestock operations that represent the cash flow from the land.
Modern farms also tend to be complex organizations owned by several family members, so a single loan transaction must often take into account the finances of five or six people, Field said.
As a relatively small company, Harvest Capital relies on nimbleness. The farm mortgage field, which represented about $250 billion in loan volume last year, is dominated by government-sponsored lenders, large banks and life insurance companies, among others.
A sale, purchase or trade of property can happen fast, which means Harvest Capital must quickly smooth out the debt collateral ramifications of the deal.
“Agriculture doesn’t forget that,” said Field. “Can you meet the needs of agriculture as it moves and shakes?”
As a longtime lender to the industry, Field has noticed that two farms with similar capital levels can end up with different results over time.
One may grow exponentially in revenues and sophistication, while the other becomes debt-ridden and burdened with financial problems.
Operations with a constantly updated knowledge of their balance sheet and a strong grasp of the business side of farming tend to succeed, he said.
Well-defined and functioning roles for the people who run the company are also paramount, Field said. “Usually, if we see a team fighting itself, it’s tough.”
Field generally advises his clients to avoid “cross-collateralization” of their debt — using long-term assets like real estate as collateral for operating lines of credit and short-term debt.
This option may seem viable during profitable years with no financing pressure, he said. During lean years, though, a farmer may need to sell off assets to resolve liquidity issues.
If the same lender has issued both short- and long-term debt, this task is inhibited because the lender has the ability to dictate the borrower’s use of funds, Field said.
“They’re now dictating the management of your balance sheet for you,” he said.
If he used separate lenders, the farmer’s damages would be limited to the liquid assets that serve as collateral for the short-term debt, like accounts receivable or inventory, he said.
“Keep an iron wall between them,” Field said, referring to collateral for short-term and long-term debt.
Farmers are generally fiercely independent, and tend to be conservative when taking on debt, he said.
The “guy with mud on his boots” is who keeps the lights on at Harvest Capital, Field said, adding that such clients also provided the impetus to start his company.
Prior to establishing Harvest Capital, Field worked as an agricultural investment consultant for Metlife. He was reluctant to leave the Northwest when the company wanted to transfer him to another region.
“Our lifeblood is in the West,” he said.
Former clients urged him to set up his own shop, while investors who were familiar with Field provided the capital he used for loans.
Despite trepidations about launching a new business with a wife and young children at home, Field incorporated Harvest Capital in 1992.
He initially paid his salary and that of his employees with credit cards until the business got going, but the decision turned out to be correct.
“My phone never stopped ringing,” Field said. “We grew exponentially in volume.”
Occupation: President of Harvest Capital
Family: Wife, Laurel, and three grown daughters
Hometown: Canby, Ore.
Education: Bachelor’s degree in agricultural business, Colorado State University, 1983