Understanding Lines of Credit

Whether you’re a beginning farmer or an experienced operator, you’re probably no stranger to the unsteady cash flow typical to the annual production cycle.

Here’s a glance at this episode:

• [3:56] A line of credit can be best described as a cash flow tool to help you get through cyclical seasons in your operation, like the next planting season or finishing a set of cattle for market.
• [4:41] A line of credit works much like a credit card. Unlike a loan payment, money can be pulled out.
• [5:31] Grain operations will primarily take advantage of lines of credit to purchase inputs for next year’s crop season at a lower cost.[6:26] Flexibility is key. Lines of credit allow you to purchase things you need, when you need them.
• [7:18] Lines of credit are ideal for both beginning farmers and well-established operations.
• [12:29] For first-time borrowers, lines of credit are typically structured on a 12-month basis, allowing you to pay it down over the next year, establish a relationship with your borrower, and help them understand your operation needs.
• [13:36] Most lines of credit have a variable rate and are revolving, meaning once a certain amount of money is pulled out and paid back, that particular amount is available again.
• [14:49] When looking at revolving versus non-revolving lines of credit, revolving lines of credit fit well for grain operations. Whereas non-revolving lines may be better suited to feedlot producers.
• [16:53] Lines of credit have a renewal season. Meeting with your loan officer to determine a renewal amount is based on your projected income and repayment capacity.
• [17:40-22:27] Our hosts give examples and scenarios of how they would determine a line of credit for various types of producers and situations.
• [24:12] A secondary product to a line of credit is a grain inventory loan. This allows grain operations the flexibility to hold crop back to wait for better prices or contract months out.

Resources mentioned in this episode:

What are year-end balance sheets and how to build them with Credit Analyst Joel Althauser

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Bios

Host: Matt Adams

Matt serves Paulding County as an account officer at AgCredit. He has worked in ag lending for over three years and previously worked in farm equipment sales for 11 years. He and his wife farm in northwest Ohio with their two daughters and son. His favorite part about AgCredit is the people. From the member-borrowers to the internal team at AgCredit, every day keeps getting better. Matt hopes to bring insights to ag lending and some laughs to the AgCredit Said It podcast.

Host: Brenna Finnegan

Brenna has been an account officer serving Lorain County for three years. She’s worked in the agricultural industry for over 16 years with experience in livestock production, specialty crop production, seed production and processing/distribution. She grew up on a small family farm raising row crops and cattle. She currently has her own herd of beef cattle that she breeds and sells as show stock calves for 4-H and FFA members. At AgCredit, Brenna enjoys being able to work directly with the local farmers and especially helping young farmers achieve something that they didn’t think they could.

Host: Phil Young

Phil is an account officer for AgCredit serving Van Wert County. He’s been in ag lending for over three years but his agricultural background goes back much farther. He grew up on his family’s farm where his father raised a large herd of sheep. Currently, he helps with the family farm raising corn, soybeans and wheat. Phil likes working at AgCredit because he can help people achieve their dreams. Whether that is purchasing a new piece of farm ground, updating a piece of equipment, or helping a borrower understand their financials, helping his clients succeed is always his goal.

Host: Libby Wixtead

Libby has been an account officer for seven years serving AgCredit members in Marion County. She grew up on a 200-acre grain farm and was very active in 4-H and FFA. Today, Libby and her husband operate a 2,400-head swine finishing barn. Her favorite thing about working at AgCredit is working with local farmers from the same area where she grew up and seeing their operations thrive. She loves working in agriculture and helping her customers be successful year after year.