Preparation key for new farmers seeking loans
By TIM HEARDEN
ORLAND, Calif. -- A variety of loans is available for young and beginning farmers to get their start in the business, but prospective borrowers should come prepared, an expert advises.
People looking for start-up loans to buy land or plant orchards should have a balance sheet of their assets and debts, a realistic business plan and a clean credit history, said Nanci Souza, an assistant vice president of Northern California Farm Credit in Red Bluff, Calif.
They should be armed with lots of information about their desired commodities before they begin, and should avoid agreeing to credit terms that they can't afford, Souza told new and prospective growers at a workshop here March 26.
"Don't be in such a rush that you hurt yourself," she said. "Don't quit your day job ... and don't expect to get average yields every year. It's like rainfall."
Souza was one of about a half-dozen financial experts who offered financial readiness and business planning tips during an all-day seminar sponsored by the Chico, Calif.-based Northern California Regional Land Trust.
About two dozen growers and other professionals received advice on applying for USDA Farm Service Agency loans, including a microloan program for small and beginning farmers, and broke into afternoon roundtable discussions on how to prepare a business plan.
"My hope is that everyone leaves here with a little more understanding of how to work with the various lending systems that are out there," said event organizer Noelle Ferdon, the land trust's director of local food systems.
Obtaining financing can be tricky for young or beginning farmers who don't have cash for a down payment and don't have much equity or collateral, Souza noted.
Farm Credit offers special terms for farm loans for people who are 35 or younger or have been farming 10 years or less and have a gross income under $250,000 just from agriculture, she said.
Growers should be realistic about what they think their operation will net, gaining knowledge by using University of California cost-estimate reports or industry outlooks as a guide and by talking with other farmers, she said.
"You want to sit down with a very realistic cash flow and work with your lender," she said.
Lenders will want to see the production history of the plot being financed, Souza said. As with regular loans, farm lenders will examine credit reports to determine the borrower's payment history, she said.
"If you have little judgments out there (for unpaid bills), find out about them and clean them up," she said.
Growers should also be realistic about their projected costs, she said.
"If it's costing you $1,800 an acre to produce your commodity, don't come in with a budget that says $1,200," she said, adding that growers should explain any fluctuations in costs or income.
On the other hand, "if you really only need to borrow $10,000, we don't want to set you up with a $40,000 loan," she said.
Northern California Regional Land Trust: http://www.landconservation.org/