Farm Lending–Which Type Are You?
David Kohl, ag lending consulting, divides target farmers and ranchers for future agricultural lending into four categories and percentages:
- 10 percent approaching $600,000 in annual revenues and planning to grow this toward $1.5 million in revenue
- 30 percent that will be scaling down to a rural “lifestylers” or those commonly living on five to twenty acres
- 30 percent that will be exiting farming
- 30 percent that are focusing on efficiency versus growth in maintaining viable farming operations
Kohl contends that ag lender’s most important customers will be the 30% that focus on efficiency and not just growth.
I tend to agree with Mr. Kohl since many farmers went bankrupt in the late 1970’s and early 1980’s from growing way too fast. Remember, the most important number on your profit and loss statement is the bottom line profit number, not the top line revenue number.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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