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.