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Unit 3: Managing the Farm/Ranch Business for Long-Term Success

Financing Challenges

Financing can be a major challenge for developing new or innovative business ideas. Why? Almost all lenders require historical records documenting financial and production histories or pro forma equivalents based on reliable benchmark data. This is true for almost all loan applications, whether for a conventional or sustainable farming enterprise, rural business, or non-ag start-up. Lack of data, however, makes it quite difficult to develop pro forma statements for sustainable agriculture enterprises.

Here are some of the key financial records often requested by lenders:

• personal financial statement (including off-farm income estimate)

• production history and expense records for each enterprise

• sales by enterprise

• balance sheet (no more than 90 days old)

• current and projected income statement

• current and projected cash flow analysis

• financial ratios: current ratio, operating profit margin

• schedule F tax returns (last three years)

If you want to learn more about these types of statements and explore other business planning resources, visit the University of Minnesota AgPlan.