Posted January 18, 2023 | By: Lee Shackelford 

Farming is not an easy profession. Most people who go into it, do so because of a deep-seated passion for growing; it's less about their excitement in running a business. But you cannot be successful without both field and business acumen. It’s critically important to know both what’s happening in the field and how your business plan is performing.

Here are a few tips for growers to help improve their access to capital and take advantage of opportunities to grow their operations and strengthen their overall financial position.

Develop a sound business plan

Farmers who spend the time to develop a comprehensive, and strategic business plan create maximum flexibility, and they also have a powerful tool to leverage when they need to access capital quickly.

Take the time to build a sound financial plan that articulates your goals and the path to success. Growers who go a step beyond that to align their business plan with their annual crop plan have added flexibility to respond to the inevitable uncertainty that farmers face due to the volatile nature of crop revenues. Working with financial experts to access and manage your credit proactively, so it’s there when you need it and gives you one less thing to worry about.

Invest time in your research

Understanding the market and cash flow operations is arguably as important for a grower as their ability to produce a crop. When building a crop plan, growers should calculate how much money is needed to cover expenses before burning through capital. This ‘burn rate’ can help make tough decisions relative to expense management—for example, determining critical vs. convenient purchases—and it’s also useful in providing a cash-flow benchmark to inform goal setting and planning. 

Aside from having this general business knowledge, growers need to take time to explore their financing options. Accessing credit is not always straightforward, and the variety of options available means growers need to take the time to understand and evaluate the options. For example, using an existing credit card, or going with a traditional bank line of credit may seem like the obvious choice, but without checking how these interest rates will impact your overall budget, you might be spending more than necessary. Similarly, growers who shop around to find lenders who offer a more streamlined process – perhaps with lesser requirements, or a more efficient application processes –can save time and alleviate some of the stress associated with borrowing money.

Proactively manage your credit

Experts often refer to the 5 C’s of credit – character, capacity, capital, collateral and conditions - when evaluating a borrower. Being intimately familiar with your credit report is an important responsibility for growers to ensure you limit the obstacles between you and your goals.

Whether you’re just establishing your operation, or you’ve been in business a long time, it’s important to be mindful about how much credit you need, and when and how you pay. Check your credit reports and address issues immediately; don’t wait until you need credit to discover things, like inactive accounts, or lines of credit that have been overextended, which might negatively impact your credit report. Close inactive accounts, resolve inaccuracies and make sure your credit report is as strong as it can be. This work may lead to better interest rates down the road, not to mention that having a reliable source of capital in the form of credit readily available can be beneficial – even critical – when unforeseen events hit.

Other tips to boost your credit score:

1. Pay all your bills on time.
2. Make sure your loan terms meet your crop revenue cycle so you’ll never miss a payment.
3. Know your credit capacity and be selective about the number of accounts you open, so you are not overleveraged.

Stay the course

To ensure long-term success and profitability for your operation, don’t let your financial planning muscles atrophy. Tracking and managing the details of your business plan regularly enables you to take advantage of growth opportunities when they arise, and move quickly. Key to this is working with trusted advisors. Nurture and maintain a deep network of peers and industry experts who have your best interests in mind, who can advocate for you and provide sound guidance and advice to support your goals.

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