Building Young Farmer Finances

Input Supplier Financing Can Help Young Farmers Build Credit, But There's More They Can Do Early on to Find Success

Susan Payne
By  Susan Payne , DTN Social Media and Young Farmer Editor
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A Nutrien Financial representative works side-by-side with farmers, helping them develop confidence in their business plan and access capital for their operation. (Photo Courtesy of Nutrien Financial)

OMAHA (DTN) -- Input supplier financing that can offset the cash cost of fuel, fertilizer and crop production comes in handy during hard times. But it can also benefit farmers' bottom line in the long run.

Colorado producer Marc Arnusch, a third-generation farmer of a diversified row-crop and agri-business operation, said this was a lesson he didn't learn early enough in his career.

"I didn't know how to stretch my ability to buy products, but I found out through time that the flexibility, in terms of cash flow, from input suppliers benefited my bottom line," Arnusch said. "It helps the input supplier sell product, but it also helps provide flexibility for growers, and that's something I champion within our farm today."

Arnusch has seen the value of input suppliers through his previous work as a professional sales representative for Pioneer and Channel, although he no longer represents those companies. He's also advising his son and niece, who are in the early days of their farming careers.

"Financing with input suppliers helps build credit, but it also fosters a relationship with the vendor. As a young producer, you should capitalize on creating a strong tie with an adviser and developing that relationship to make sure you're keeping your costs under control," Arnusch said.

Maintaining a working relationship with a vendor demonstrates where you are in your farming operation, Arnusch said. When cash gets tight, and it does from time-to-time, he said, they know you're working hard to make sure they receive their funds.

John Maman, Nutrien Financial's director of marketing and sales, said young farmers should work with lenders that offer fixed rates.

"If they (farmers) have those forward contracts and negotiations, that will give us (lenders) a sense of security," he said. "It starts with the right economics, how much they need to be profitable and taking action toward better credit."


Financing a farming operation today takes considerably more money than it did five years ago.

"We're cycling through many more dollars today than ever before. Young farmers aren't worried as much about credit as they are worried about access to credit," Arnusch said. "Focus on your crop, marketing, make sure you know your numbers, and then right behind that, make sure you have clear access to capital."

Even if a new, beginning or young farmer doesn't have a lot, Maman said they should track their assets and liabilities on a balance sheet or income statement. It should include expectation for income and potential sources of revenue for their operation.

"You have to have more than a good operation and be better than just a good grower. You have to have the business principles underneath you as well," Arnusch said. "I struggled early. I knew my balance sheet, profit and loss margins, and lenders took a chance on me that they didn't take on others.

"When tough times come, and they certainly are around the corner, vendors and lenders will always lean on the side of someone who knows their finances well," Arnusch said.

Access to capital isn't guaranteed, but command of the principles of business will help.

"As a young or beginning farmer progresses through the industry, they will manage more people and money, and those expectations in the business plan come to fruition in a prevalent way," Maman said.


"You may be the best grower in the world, but does anyone know who you are?" Arnusch asked.

Having conversations with local bankers, volunteering and mentorship in the ag community is vital for establishing credibility, but it also helps bridge potential knowledge gaps.

For Arnusch, networking and relationships were at the core of what made his farming operation a success nearly 30 years ago.

"I strongly believe in the importance of being involved in your industry, whether that's leading a 4-H club, being on the board of a Farm Bureau or serving on a commodity organization board of directors," Arnusch said. "Credibility and establishing an identity are key for a young farmer."

Those connections also help build relationships with other farmers who become mentors. While no two years are alike, mentors may have seen similar years in the past, and that guidance is beneficial for young producers.

"Generations could have passed between you and someone you depend on in the ag community for critical advice, but the same principles transcend those gaps," Maman said. "It's important that young and beginning farmers foster those relationships to not only be prepared financially but make the best decisions for their farms.


Opportunities for networking have improved with technology, and young and beginning farmers can use those tools to their benefit.

"It's exciting to be in the ag industry if you're a young farmer who embraces technology, data, monitoring and sustainability options the way data can be actionable now," Maman said.

Maman said social media as an engagement tool for networking is similar to geography without borders.

"The way we can reach out to others in the farming community is much more tangible now," Maman said. "Young farmers are meeting other farmers through social media, networking events, college or other seminars, and they're going to keep in touch with them."

Candid stories on how to overcome challenges and real-life examples of what farmers are experiencing can be found on social media, creating a pool of knowledge for young farmers looking to learn.

"Social media can provide touch with individuals," Maman said. "We're always trying to find ways that farmers can grow professionally and personally and social media represents a platform that can make that happen."


An easy way to compartmentalize credit and improve your loan eligibility when presenting a business plan to lenders is to work through the Five Cs of Credit: Character, Collateral, Capacity, Capital and Conditions.

Character is about the borrower's reputation in the ag community. What is your personal investment in the ag operation?

Capacity is the borrower's ability to repay the loan, including potential off-farm income streams. Maman said since capacity can be overleveraged, this is the most challenging area for young farmers. One can accrue a lot of debt, but do they have the capacity to repay that debt?

Collateral is the assets that can be leveraged to get the loan. Do you have liquidity or money that you can put down? Other land or buildings on site as part of the entity?

Maman said Nutrien Financial, like many other input suppliers that provide financing, doesn't take a collateral position when lending, meaning their loans are unsecured.

"We lend as much as we can based on the capital that one might have," said Maman. "A young farmer might not have land and is cash renting, but it's still important to understand what needs to be collateralized to obtain a certain loan."

Finally, the last C is conditions such as the interest rate, the purpose of the loan and the amount.

While working on the Five Cs, young borrowers should also remember the basics and check their credit report regularly.

"It's important to do that early on. Taking action before you need the credit is important for young growers," he said.

Susan Payne can be reached at

Or you can follow her on Twitter at @jpusan

Susan Payne

Susan Payne
Connect with Susan: