ARM’s Equity Solution
Ag Resource Management (ARM) offers a solution to farmers with limited equity. ARM doesn’t look at equity like a traditional bank does, because ARM uses this season’s growing crop, crop insurance and program payments as collateral.
If a bank determines they can’t renew a farmer’s loan, the farmer can work with ARM to finance the entire loan or just a portion. Usually the bank will handle traditional term lending, and ARM will create a plan for the farm’s operating loan. ARM can step in when there isn’t enough equity for a traditional banker to approve a loan and provide the needed liquidity for a farmer, based on the projected crop. This partnership allows the farmer to continue farming.
ARM also consults with the farmer to help identify where issues may exist on the farm. The process of sitting down together and outlining a budget helps determine exactly where the money is going and where the farm can tighten its budget to get the most ROI out of the loan. For example, family living expenses may still be on the high end compared to where commodity prices currently sit. When expenses are detailed, it’s often easy to find areas to trim back.
Rent is another example of a line item that can often be reduced. It’s not an easy discussion, but once an analysis is complete on a field-by-field basis and the expenses are broken down, it’s fairly easy to see where rent is too high to create a profitable scenario. A farm’s highest producing fields aren’t necessarily the most profitable. Often, the highest producing fields are also the ones with the highest rent. When farming a particular field is not profitable, a farmer must decide to either renegotiate the rent or give up the land. Giving up hard-won land contracts can be very difficult for a farmer, but sometimes it’s the best choice for the long term.
ARM also creates a cashflow analysis, which includes the crop budget. Looking at input costs and actual production history (APH), ARM works with the farmer to determine where to spend the loan dollars for the best possible return — sometimes optimizing profit means accepting a smaller yield and benefitting from reduced seed and input costs.
Lastly, ARM takes a holistic approach, looking beyond just that season’s crop to help address issues that affect the entire operation. This perspective helps farmers focus their resources throughout the year, allowing them to operate much more efficiently and reach their long-term goals.
Contact your nearest ARM location to get started.