In agricultural America, it’s a rite of passage: the farm being handed down from one generation to the next. And when younger farmers take control of their family’s farm, the biggest challenges typically aren’t found in planting and harvesting, tasks they’ve often been involved with for decades. No, the real hurdles for young farmers come on the financial end, in managing capital and cash flow and the other matters that Dad or Grandpa always handled in the office at night.
“That’s a real adjustment,” says Matt Hoose, chief agribusiness officer at Prospect Bank, a financial pillar of Central Illinois since 1873. “In most cases, we’re all good at running equipment. That’s the fun part of what we do. But some of my guys will say they’d rather go to the dentist than sit down and talk about their finances. That’s where we come in. Once they get into it, it’s not as exhausting a task as they think it is. And one thing I emphasize with all my farmers is, you need to know financially where the operation is at all times.”
Having grown up on a family farm near Rossville, Ill., Hoose knows that farm succession can be fraught with complexities, from an older farmer struggling to step back to the next generation getting to know balance sheets and business analyses as well as seed and fertilizer. That’s where the FarmWise suite of financial products available through Prospect Bank comes into play—not only can they help a young farmer in securing capital, but they can also help the client work through the numbers and find a path to profitability.
“We walk with them hand-in-hand, offering them help when they need it,” adds Tanner Burton, junior agribusiness officer at Prospect Bank, who grew up on his grandparents’ farm in Illinois. “We can be a resource to guide them, to help make it less stressful.”
Loan programs ‘a phone call away’
In Illinois and across America, farming remains overwhelmingly a family business. There are 2 million family farms in the United States, according to the U.S. Department of Agriculture, and they vary in production value from a few thousand dollars to over $1 million annually. Ninety percent of family farms in America are owned by a single individual or family, with the average age of a farmer being 57.5, according to the National Agricultural Statistics Service.
That means lots of sons, daughters and grandchildren who work on family farms are likely to be in charge one day, responsible for the farm’s finances as much as its agricultural yield. And they’ll quickly realize the need for capital, given that farms require seed, fertilizer and equipment, and won’t generate a dime until the harvest is in. Corn can cost an average of $400 an acre, soybeans $250. Multiply that by the average U.S. farm size of 444 acres, and you’re talking about hundreds of thousands of dollars needed upfront.
On that front, Prospect Bank offers options that can help ease the financial burden. In addition to its own lines of credit offered through the FarmWise program—in which loans can be tailored for crop production, equipment, or the purchase of additional farmland—Prospect Bank can help young farmers potentially find loans with better terms and interest rates available through the Farm Services Administration or the USDA.
“We have a lot of contacts, including people I went to school with, with people who work within the FSA and USDA,” says Burton, who double-majored in agribusiness and agronomy management at Illinois State University. “There are countless programs that are just a phone call away for us. That’s a way for us to provide that assistance by bridging the gap, or being the middleman for the young farmer in getting into one of these programs that’s offered.”
And as for figuring out how much capital they need? The staff at Prospect Bank can help with that, too. “We sit down with them and work out a projected cash flow,” Hoose says. Crop insurance records can help them come up with an estimate of their expenses for the next year. Perhaps their father or grandfather is willing to rent their equipment. Crop budget projections put out by the University of Illinois help determine a price estimate for crop per bushel. A financial picture emerges of how much capital the young farmer needs, and how much they can expect to make at the end of the season.
Always there to answer questions
Although some farmers don’t come from a family farm, they are a minority, and nearly half of those producers operate in Alaska, according to the NASS. While Hoose and his staff at Prospect Bank may occasionally see a farmer with no children handing his land over to someone outside the family business, those cases are exceedingly rare. Usually it’s the father, grandfather or uncle starting to step away, and the younger generation beginning to take control.
And for those families working on a succession plan, Burton provides some advice: “One thing we press upon the older farmers who are passing things along is, start to get the next generation involved in seeing the numbers,” he says. “Not so much doing the finances themselves, but sitting down with them and letting them see everything and get a feel for it rather than just dumping it off.”
Regardless of the need, Prospect Bank is always there to help, in ways that go beyond finding access to capital. When young farmers are filling out their balance sheet for the first time, Hoose or a member of his team are often in the room to help with any questions they might have. It’s another bonus of having lenders who know the family farm business—after all, they grew up in it themselves.
“I don’t want to treat them with kid gloves,” Hoose says. “We want to handle them the way we handle our experienced farmers. We just realize when they’re up and coming, they may have more questions. But they’re typically coming in well-educated already, whether they’ve been to college or not. Our young farmers have a good knowledge base, so we just offer confirmation of what they think they can do.”
Are you a young farmer and interested in learning more about what Prospect Bank can do for you? Visit BankProspect/FarmWise for more information, call (877) 465-4154, or visit one of their nine branches throughout Central Illinois: in Ashmore, Brocton, Champaign, Gilman, Homer, Kansas, Sidell, Watseka or the main location at 177 West Wood St. in Paris.