Developing a Farm Business

[GACowboy]

I live in GA and I am looking for a good line of credit as well as need for a few more pieces of machinery. I don't want to tie all my personal credit up in buying this due to normal life expenses. Is there a way to create a business? Any advise would be appreciative. Thanks

 

[Rafter S]

You probably wouldn't like the advice I'd give you.

 

[torogmc81]

There is only one way to create a business.

START spending money. Lots of it

 

[GACowboy]

I've got 30 cows already yet I am looking at doing an LLC. Or Farm business so I am not tying up my credit. I mean I am sure a bank wouldn't like seeing a note on my credit report for $70,000 worth of equipment when it comes time to buy a house. Also would a business help by means of tax brackets and help cover you if a lawsuit came down?

 

[denvermartinfarms]

A llc will help in a lawsuit but won't help on taxes.

If farming isn't your " normal life " I wouldn't be trying to get a line of credit or loans to buy machinery. If you have 30 cows and your not in it full time and it's not how you make a living I wouldn't buy 70k worth of equipment that I couldn't pay cash for.

 

[Bigfoot]

Many years ago, I was a loan officer at a bank. If you are talking about buying machinery for a farming operation, most banks are going to want you to personally sign the note. The vast majority of farms in my area are corporations. All are family owned, are set up as such for various reasons. A well established farm could borrow money like you are talking about. It would be very difficult for a beginner. there are some advantages to a corporation, that go beyond liability. One that comes to mind is health insurance etc. As CEO of my "farm" I have a benefits package for myself. It includes a truck to drive, life insurance, . You see where this is going.

 

[Stocker Steve]

Bring a (positive) cash flow projection to several banks or credit unions. Their loan approval approaches can vary a lot out in the country. Some focus on family rep, some focus on household cash flow, some focus on collateral, some focus on servicing FSA loans...

You may want to term out profitable investments, and also consider an operating loan.

 

[TexasBred]

I live in GA and I am looking for a good line of credit as well as need for a few more pieces of machinery. I don't want to tie all my personal credit up in buying this due to normal life expenses. Is there a way to create a business? Any advise would be appreciative. Thanks

As an "x" banker also I'd much rather see a $200,000 note on a home on your credit report with a history of excellent payments than $70,000 worth of equipment with excellent payments. Own a home and "poor boy" the farm for a while.

 

[J&D Cattle]

I am currently a loan officer and Bigfoot is right, you have have to sign a personal guarantee even if the note is in an LLC's name. While the debt might not show up on your credit report if and when you did fill out a mortgage application you should list this debt as you are personally responsible.

In giving you that advice I just realized I did not include my LLC's debt when I filled out my application to build our house a couple of months ago. Whoops!

$70K might just have been a number but that is way more than I would recommend spending on equipment unless it is going to make you a profit somehow. I don't have a problem owing a little money on cattle and such but they do have the potential to earn a return. Running around 40 head I can't justify that new $50K tractor, yet. Good luck.

 

[denvermartinfarms]

I will go back and say I am in no way against barrowing money. I would have nothing if it wasn't for taking the risk of having debt on things that have made me money.

But from the information GAcowboy has provided it sounds like farming is not a major source of his income, it also sounds like he has 30 cows paid for. In that situation It doesn't make sense to me to be barrowing money.

 

[Caustic Burno]

A llc will help in a lawsuit but won't help on taxes.

If farming isn't your " normal life " I wouldn't be trying to get a line of credit or loans to buy machinery. If you have 30 cows and your not in it full time and it's not how you make a living I wouldn't buy 70k worth of equipment that I couldn't pay cash for.

Denver hit the nail on the head.
I ran 35 head plus or minus a few for years if you don't have cash you don't need it.
If the cows can't buy it again you don't need it.
First rule of holes is stop digging.

 

[Stocker Steve]

We have (one) ranching family in the area that is making big $$$$.
They borrow, buy inputs low, and sell expensive bulls high. :banana:
Spoke with one of sons, and he said they had learned that low input was low revenue.
Point here is that they are very good aggressive managers and leverage works for them.
I am not as good a manager - - so while I will borrow to buy lime and cows, but not iron nor bulls.

 

[muleskinner]

Just a note from our Extension service. They say if you are running 30 cows or less, don't buy equipment. It is cheaper to buy your hay and inputs than to grow your own.

 

[TexasBred]

Just a note from our Extension service. They say if you are running 30 cows or less, don't buy equipment. It is cheaper to buy your hay and inputs than to grow your own.

Even when milking 400 head of cattle I also felt I could get higher quality hay for less money than I could put it up myself. I can be selective rather than being stuck with what I grew and then have to supplement it.

 

[denvermartinfarms]

Just a note from our Extension service. They say if you are running 30 cows or less, don't buy equipment. It is cheaper to buy your hay and inputs than to grow your own.

I think that's probably right. Doesn't fit everyone with 30 cows, but I believe in some cases they are right.

For instance you have 30 cows on your place, and have the chance to cut hay on a place you don't own and don't have the ability to put more cows, it's given to you to cut the hay on for free. You probably own a tractor already, so then putting together a set of hay equipment for say 6000$ that may not be great but could get the job done might be the way to go, rather than buying 150 bales a year at 40$ or 6000$ every year.

 

[Caustic Burno]

Just a note from our Extension service. They say if you are running 30 cows or less, don't buy equipment. It is cheaper to buy your hay and inputs than to grow your own.

Even when milking 400 head of cattle I also felt I could get higher quality hay for less money than I could put it up myself. I can be selective rather than being stuck with what I grew and then have to supplement it.

When I had 35 head and bailing hay for myself and neighbors I had 36 dollars a roll in my hay.
That was back in 2010. Hate to see what that would pencil out today.
Small scale increases input cost. A hay baler can make a preacher cuss. Nothing I mean nothing can go
fubar as bad as a hay baler.

 

[SteppedInIt]

I've got 30 cows already yet I am looking at doing an LLC. Or Farm business so I am not tying up my credit. I mean I am sure a bank wouldn't like seeing a note on my credit report for $70,000 worth of equipment when it comes time to buy a house. Also would a business help by means of tax brackets and help cover you if a lawsuit came down?

Setting up an LLC is easy, at least here in TX. Cost $300 and a few minutes on the internet. There are benefits in doing business as an LLC that you can google and read all day about. I believe its especially beneficial when you have partners, instead of creating a partnership. A partnership has no protection like a LLC. As far as taxes go, if you are the sole member of the LLC, the IRS treats it as if you are a sole proprietorship. There are grey areas as to lawsuits and protection. Having the LLC is not a guaranteed protection for sole member LLC's, but I guess its better to have the LLC. I believe this varies by state.

I created an LLC with the state with the intensions of separating the cattle business from my personal affairs and some of the other reasons as discussed.

 

[bverellen]

The most profitable ranchers don't own any land, cattle or equipment. Think about that awhile.

A small operator would be money ahead to buy in his hay(fertilizer and micro nutrients), avoid the money and time involved in growing and making hay, and use his hay fields to run more cattle.

According to Gordan Hazard all you need is a pick-up and a two hammers to run cattle.(two hammers in case you lose one)

 

[Nesikep]

I would also minimize the equipment purchased.. If a neighbor has a WORKING baler for sale, pick that up and an old, working sicklebar haybine... you can set yourself up for $10,000 easily... it can even include the tractor.. that is something you can buy on a line of credit if need be and can pay off in a weeks notice by selling a couple cows and calves... $70,000 is going to take selling the entire herd.

 

[Son of Butch]

IMO
With 30 cows the fewer wheels the better. Equipment costs, fuel ect. can quickly and easily eat up any money they produce.