Debt in restarting the farm - a new vision

Starting the farm again understanding equity and debt

I promise to finish my planning series but first, because I was at USDA FSA and NRCS and thought I would write about restarting the farm from a financial standpoint. First let me say I always open about money. I feel like there is no shame in not making a lot of money and no shame in the type of success most small farmers might eventually have at best. We are not running oil companies or investment banks. We generally exploit our own labor not that of others so why not be honest about where we are.

To put things into simple terms last year we did really really well financially. If we had not bought a newer tractor, reroofed a barn, put in a parking lot and paid down a lot of farm debt (accelerating our land contract payments), and bought all of this year’s supplies we would have had a net income of way over $100,000. We were able to pay folks well, the farm has never looked or produced better. Unfortunately, even in success we were unable to actually take care of ourselves emotionally and physically which was a poor choice we have always made.

In restarting the farm I am drastically rethinking just about everything from my work week hours, to my relationship to future partners (business and life), to what kind of parent, friend, daughter, sister and person I want to be. I have always been debt adverse to a fault (I now realize). Paying cash year after year for giant capital expenditures, borrowing money for several years from family (which in debts you in other ways too), and paying off the farm at record speed.  I have taken these all off the table.

Since I am now focused on life and happiness first (and let me say I am a grounded practical person who is almost embarrassed to write the word happiness) my ideas about debt are very different. I would rather spend 10 more years paying off my perfect farm, spending 20% of my income on fun adventures and nice new carhartts, taking vacations, working 40-50 hours a week max, and having time to enjoy my children, friends and days than pay off the farm fast, pay cash for investments, increase equity at record speed and cry for 7 months as my life collapses. Sounds obvious but many farmers like me also LOVE farm work, are workaholics, find our meaning and direction from farming and can get lost in the work happily as life in a deeper sense passes us by. Our lines for what is reasonable change as we get deeper into farming. And if others are like me at all, there actually is a payoff financially and in terms of a farms care and beauty, that comes with abandoning everything else – terrible but beautiful at the same time.

I had a conversation with a fellow farmer the other day and he said – you know hopefully you will still work really fast and efficiently and hard but then you will take off all the time you saved by being that way. That is exactly what I want. I will never be a slow worker or able to control my love of getting hard work done fast, but boy should I enjoy the time I gain from working like that – right?

I should say that my business plan, not yet official or finished, will involve at least 150,000 of debt and probably almost double that if I purchase all the land my mother owns. I need a house which is a little spendy even if I use a pre-exsisting farm building (because I cant actually live with my mother and three children together forever). I want a simple packshed but one with a few bells and whistles. I want solar power and a new well that can actually run irrigation and retain pressure in the kitchen sink, and I am putting in the exact greenhouse and hoophouses I want – upfront and paying someone to do the work (or at least some of it). When I say want I also mean need – need in a broader sense because while I can scrap and scrape by I shouldn’t have to and I am worth more to myself and others than that.

So, what is the plan… first, I am in a unique position financially for a starting farm. That is why I am restarting. First and foremost I have a huge amount of equity which will be paid out to me over the following 5 years – 150,000 to be exact. It will cover all my infrastructural investments or get close. I also own 40,000 of nice farm equipment that works perfectly in my soil type (because my new soil is the same as the old), and legal access to another 40,000 of equipment from the home farm and even more because we share things with our neighbors. I have use of infrastructure and land at my old farm for now and into the future for the greenhouse and cooler. I have almost every farm supply I need and all of my inputs covered for my first season (this year). I also have 12 years of farm experience, I have expanding wholesale (restaurant and small grocery) markets that grossed 50,000 last year and I expect to almost double. I am also planning a CSA for next year (3 seasons – 50 members) which I know I can fill and should be one of the best CSAs in the country. I also have a deep understanding of market potential, production, the economics of farming and just about everything I need to do. I am expecting to use a combination of both long term 30-40 year financing for the house, well, packshed, and renewable energy and shorter term operating loans of 5-7 years for hoophouses and basic supplies. I also plan to pay it out slowly and will be visiting Yellowstone national Park next winter, vacationing at a lake for a week midsummer for the rest of my life with my kids, and going to the Andes to hike. Life is life and while I used to see debt as a shackle at this point it is a form of liberation.

My business plan is on the horizon.. and I will share it here and USDA FSA is waiting in the wings to help.