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How first-generation farmers can build for success

How first-generation farmers can build for success

Industry experts say building a credit profile and having a well-constructed business plan are essential for the success of new farmers.

Entering into the world of agriculture for first-time farmers can be incredibly daunting, but the cultivation of some sound financial practices and a good business plan can make a huge difference, according to industry experts.

“It’s an exciting time to be starting out as a farmer. The technology and resources available for today’s young growers to launch their careers are unprecedented; however, we need to find ways to help the next generation overcome the hurdles to establish and grow an operation,” said John Maman, sales and marketing director for Nutrien Financial. “Providing young farmers with solutions to access capital is one way to ensure the health of our food system for the long-term.”

Nutrien is the one of the world’s largest providers of crop inputs, distributing 27 million tons of potash, nitrogen, and phosphate products for agricultural, industrial, and feed customers worldwide. The company’s retail network also services over 500,000 grower accounts.

For first-generation farmers, there are a number of financial factors that can contribute to success, Maman noted.

“Take the time to build a sound financial plan, with goals and a clear path to success. When it comes to accessing capital, there’s strength in the business plan and showing the full financial picture to get further. This includes reporting actual and projected income, providing bona fide financial statements, detailing expenses, cash on hand, and capital reserves,” Maman explained. “Many young growers may not feel confident that they have a lot to show, but if everything is on paper and covers all details – like listing any forward contracts or reporting revenue from work outside of the farming enterprise – many find they probably have more than they think to help get the operation off the ground.”

Maman also highlighted the importance of researching the crop the farmer is intending to raise and a realistic plan for expenses.

“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, young growers should also calculate how much money is needed to cover expenses before burning through capital,” Maman explained. “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.”

For first-generation farmers, capital is generally regarded as the funds needed to get an operation up and running. This can come from a traditional operating loan, a lump sum of cash, lines of credit or credit cards.

In addition to knowing the “burn rate” of capital, Maman said it’s important that growers explore their financing options.

“Accessing credit is a challenge, so young growers need to be extra diligent in researching the options and looking for lenders who will work with them. For example, some lenders may not be more willing to overlook certain criteria, like years in business, if they can present a sound business plan. There are a plethora of ways to diversify financing, so knowing the options and managing credit can make the difference when just getting started,” he noted.

Managing credit

Young or new growers are often building a credit profile and there are some key items to consider, Maman explained.

“Experts often refer to the 5 C’s of credit – character, capacity, capital, collateral and conditions – when evaluating a borrower,” he said. “Although many newer growers might find themselves at the start in building a credit profile, there are still things you can be doing to make sure the credit report doesn’t hinder your ability to realize goals.”

Maman recommends checking credit reports, proactively closing inactive accounts, and avoiding overextending credit lines.

“Some housekeeping might 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,” he said.

Other tips to boost credit scores include:

• Just because a loan has a low rate, that doesn’t mean it meets the operation’s cash flow needs. You don’t want to run the risk of damaging your credit if the farm can’t make a payment because the original terms of the loan didn’t meet the crop revenue cycle.

• Pay all bills on time.

• Don’t chew up the farm’s entire credit capacity.

• Avoid the gimmicks – many companies will offer incentives for signing up for new credit accounts, but having too many accounts can negatively impact a score. Be selective about the number of accounts opened.

Don’t go at it alone

Just because someone may be new to the ag industry, that doesn’t mean the knowledge base of new farmers has to be limited.

“Leverage network and social media channels to fill in blind spots and engage in a forum to solicit help and advice,” Maman said. “Growers who establish and build a strong network of partners can take advantage of others’ experiences and gain been-there-before knowledge that they might not have personally. The ag industry is extremely community-focused and information is readily available if you ask.

“Leverage partnerships with other ag industry professionals, be it crop consultants, equipment dealers, tax professionals or financial experts – the people who are invested in your success – to get sound feedback, maximize opportunities, find answers and get clarity,” he concluded.

For more information about Nutrien and the financial options they offer beginning farmers, visit

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