Many beginning farmers struggle to find the capital they need to get started. Buying a piece of land, fencing supplies, a packing shed, tractor, young fruit trees—these things can add up to an overwhelming initial investment. And these farmers often have a hard time finding the financing that fits their operations.

Dean Harrington is a recently retired banker and longtime family farm advocate from Plainview, in southeastern Minnesota. Harrington was recently featured at a Land Stewardship Project “Looking for Land” meeting in Stillwater, Minn., to share his advice with beginning farmers on applying for loans and finding a banker who will be a strong ally.

Harrington was a farm loan supervisor at Foresight Bank for over 40 years, and since retiring has been working with local businesses to create a supportive environment for new farmers, entrepreneurs and artists. Foresight Bank continues to find new ways to support family farms and businesses and strengthen the Plainview community. Throughout his career, Harrington has seen parallels in consolidation of farms and banks and believes in the importance of independent, diverse farms and banks.

Role of Community-Minded Bankers

From the perspective of a banker, it can be hard to give out smaller loans to operations with lower cash flow which can mean credit is not accessible to many small family farms. Banking regulations require a high level of analysis for all loans regardless of the amount, so it is tempting for a bank to steer away from all but the highest dollar loans given the work involved.

“Bankers are like water—we always look for the easiest path,” Harrington joked.

But he stressed that it is possible for banks—especially those rooted in rural communities—to find creative ways to serve more diverse operations. Doing so benefits those banks because there is a strong business case for those farms, and they benefit from having clients that produce high value crops, respond nimbly to market conditions, demonstrate thrift and financial responsibility, and are good members of the community.

Finding a Banker

Beginning farmers should seek out references from their peers and meet with several bankers to find a good fit. Harrington urged members of the Looking for Land group to view applying for a loan as a way to seek someone who will be a part of their farm team.

He suggested starting the conversation with the banker something like this: “I’ve heard that this is a good bank, and I’m looking for someone to work with. I’d like to see if this is a good fit.”

Making the Business Case

When meeting with a loan officer, farmers should be confident about their enterprise and make the case for their business from the beginning. Too often, beginning farmers come into a bank “hat in hand” and don’t expect things to work out. Many bankers are interested in working with a more diverse operation but aren’t familiar with how it works. Farmers can offer good background information about the viability of small, diverse farms, and help the banker figure out how to best serve their operation.

“Bankers love numbers,” Harrington emphasized.

While many farmers are practiced at communicating the ethics and stewardship values that guide their farm, they are less comfortable talking about their economic strengths. When farmers share their marketing plan and balance sheets and detail their high value products, loan officers begin to see that their enterprise is set up for success. Three years of income tax returns and business projections are also good documents to bring along for that initial meeting.

During the Stillwater Looking for Land meeting, several beginning farmers shared frustrating attempts to get a loan. Loan officers dismissed their budgets, saying that they had not penciled out enough for living expenses. This response was maddening, because these people have worked hard to keep their expenses down in order to save and invest in the operation and that strength was now being viewed as a weakness.

Harrington advised these farmers to keep that conversation going and show how they have been making it work with personal budgets and savings records. Speaking up about the value of thrift and talking about the role financial responsibility plays in strengthening the farming enterprise may help educate that loan officer on the viability of the operation.

Financing for independent family farms is still a struggle. But by building a good relationship with a loan officer and making a strong business case, financing from a local bank can be a valuable element of a beginning farm.

Sarah Claassen is an LSP Farm Beginnings organizer working on land access issues. If you are a beginning farmer and seeking farmland, check out the Looking for Land group: a group of farmers who meet regularly to support each other and learn from advisers. For more information, contact Looking for Land coordinator Paula Foreman at encoreforeman@gmail.com.