Financial Assessment - About

Farming as a business entails financial opportunity and also some degree of financial risk. It is important to understand those risks as well as the level of risk you are comfortable with and capable of managing, particularly when it comes to how you acquire land and at what cost. It is also important to understand the risk levels and considerations that are acceptable to lenders and property owners as they interact with your farm business. Most importantly, you need to consider how the finances associated with your farm business and with securing farm tenure may affect the quality of life for you and your family.

This topic is divided into personal finance, farm business finance and farm acquisition finance. In the personal finance section you will look at assessing your family living needs as a basis for determining the type and structure of farm acquisition that is affordable to you. In the farm business finance section, you will examine how your farm business plan can be used to help determine the capacity of your farm business to lease or buy a farm property as well as to support your family living, and also to help secure financing. In the farm acquisition finance section, you will dig deeper into the valuations of farms, the process of securing financing, and special circumstances that may influence farm affordability and financing.

It is recommended that you view the subsection in the following order and complete the tools for each section in the same order so that you can get the most benefit from this topic.

Digging Deeper

1. Personal finance: Start here to determine your family living needs as the basis for your farm acquisition plan.

2. Farm business finance: Next click here to examine how your farm business plan will help you determine the capacity of your farm business to support you and the costs of securing farmland.

3. Farm acquisition finance: Lastly pull all the pieces of your financial plan together and learn how about farm financing, and special issues which influence farm affordability and financing.

 

Links to further resources:

1. Family Living Planning Resources

Comparison of net return to family living with purchase of a farm at market value, purchase of farm with development rights removed, and rented the farm and home 

2. Farm Business Planning Resources 

Cooperative Extension: Each New England State has a land grant university which hosts an Extension service offering courses, workshops, resources and direct technical support for famers usually including farm business planning and management:

• University of Connecticut 

• University of Maine          

• University of Massachusetts     

• University of New Hampshire

• University of Rhode Island

• University of Vermont - New Farmer Program

Classes, books, videos and other online resources:

• “Exploring the Small Farm Dream,” a pre-business planning course:    

• “Growing Places,” a pre-business planning course offered by the Women’s Ag Network (WAgN):

• Building a Sustainable Business

• NxLevel Agricultural Business courses

• “The Organic Farmer’s Business Handbook” by Richard Wiswall

• Business Entities and LLC’s Video from UVM Extension and VA Tech

• Family Business Agreements and Risk Management (the “5 D’s”) from UVM Extension and VA Tech

• Ag Plan from University of Minnesota

• See VT Farm Viability Financial Workbooks for some useful business planning spreadsheets

Farm Business Planning Programs (Direct Technical Assistance):

• VT Farm Viability 

• MA Farm Viability 

• Maine Farm Viability 

• Maine Farms For the Future Program 

   

3. Working with Agricultural Lenders:

Guides:

• First Farm Loan

• Homebuyer Guide

• Guide to Ag Credit

Lenders:

• Traditional Banks: Inquire at your local banks and credit unions about their interest in, and knowledge about, making loans to farmers.  Some banks, for example, People’s United Bank (in VT), have designated Agricultural loan officers.  Inquire also about the “Socially Responsible Banking Fund” Agricultural Loan Program at People’s United in VT.

• USDA Farm Service Agency (FSA): Use the state directory to find the county office near you:

• Farm Credit:

  • MA, CT, RI and parts of NH

  • VT and NH

  • ME

• State Agricultural Lending Agencies: In Vermont

• Other/Non-profits such as the VT Community Loan Fund 

• Alternative Tenure and Financing in “Holding Ground” Chapters 5 and 6 

• Equity Trust and Loan Fund

• Farmers Guide to Securing Land, “Fee Title Purchase with Sweat Equity” p79-83
  This guide is currently available in print only. Cost is $25 + shipping.  To order, contact Eric Winders, CA FarmLink Central Coast Regional Coordinator, eric@cafarmlink.org or call (831) 425-0303