Posted February 13, 2023 | By: John Maman

The ag industry plays a crucial role in providing fuel and energy for people across the planet, putting our industry just one degree of separation away from nearly every other. Without a robust food production system that offers sustainable growing solutions, we simply can’t do anything else. This is precisely the reason that Nutrien Financial is so committed to supporting young, and first-generation growers who represent the future of the agriculture industry.

The technology and resources available in today’s market makes it an exciting time for young growers to launch their careers; however, many newcomers to the ag industry face specific financial hurdles. Nutrien Financial is working hard to help the next generation overcome those roadblocks. Here are a few tips for young growers to help improve their access to capital and take advantage of opportunities to establish and grow their operations.

Develop a sound business plan

Young farmers who spend the time to flesh out a comprehensive, and strategic business plan have a powerful tool to leverage and enhance their credibility. This is not always where a lot of farmers seed their passion for the business, which tends to originate from what’s happening in the field, but you cannot be successful without both field and business acumen.

Take the time to build a sound financial plan that articulates your goals and a clear path to success. When it comes to accessing capital, showing your full financial picture will help you get further. This includes reporting actual and projected income, providing financial statements, and detailing your expenses, cash on hand and capital reserves. Many young growers may not feel confident that they have a lot to show, but if you put everything on paper and cover all details – like listing any forward contracts you might have, or reporting revenue from work outside of your farming enterprise – you’ll find you probably have more than you think to help get your operation off the ground.

Going an extra step, young farmers who take time to align their financial plan with their annual crop plan have added flexibility to respond to the inevitable uncertainty that farmers face due to the volatile nature of crop revenues. Working with financial experts to access the credit you need before you’ve built the business can be helpful.

Invest time in your research

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 calculate how much money is needed to cover expenses before burning through capital. 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. 

Aside from having this general business knowledge, growers need to take time to explore their financing options. Accessing credit can be a challenge, so young growers need to be extra diligent in researching options and evaluating lenders. For example, some lenders may be more willing to overlook certain criteria like years in business, especially if you can present a sound business plan. There are many ways to diversify your financing, so knowing your options can make a significant difference when you’re just getting started.

Proactively manage your credit

Experts often refer to the 5 C’s of credit – character, capacity, capital, collateral and conditions - when evaluating a borrower. Although many newer growers might find themselves working to build a credit profile, there are still details to manage to ensure your credit report isn’t adding another obstacle between you and your goals.

Young growers should focus on building credit. Be mindful about how much you need, and when and how you pay. Check your credit reports and address issues immediately; don’t wait until you need credit to discover things, like inactive accounts, or lines of credit that have been overextended, which might negatively impact your credit report. Close inactive accounts, resolve inaccuracies and make sure your credit report is as strong as it can be. This work may 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.

Other tips to boost your credit score:

1. Pay all your bills on time. Make sure your loan terms meet your crop revenue cycle so you’ll never miss a payment.
2. Don’t use your entire credit capacity. Think of capital from credit with scarcity in mind and use only what you need.
3. Be selective about the number of accounts you open, so you are not overleveraged.

Don’t go it alone when you look to scale

Just because you’re new to the ag industry doesn’t mean your knowledge base is limited. Leverage your network, including friends, family, and other relevant contacts who can help fill your blind spots. Social media channels also offer great opportunities to solicit help and advice from others who have knowledge and insight from the experience you may be lacking.

The ag industry is extremely community-focused and you’ll find information is readily available if you ask. Leverage your 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 and find answers.

Stay the course

Once your operation is off the ground, keep your financial planning muscles active to take advantage of growth opportunities. Continue building strong relationships with advisors who can give you trusted advice, and learn about technologies, tools and other opportunities that can benefit your operation.

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