Loans & Financing

By Tarrah Young

In this fourth and final post of her series, Tarrah Young of Green Being Farm in Neustadt, Ontario shares an overview of her experience with financing and debt in establishing her farm.  To glean more of Tarrah’s knowledge and her systems of exploring financing, consider checking out the recordings of the corresponding webinar series found here

When I started my own farm business, I did my best to follow the advice of a dear mentor of mine, Les Richards, who raised sheep. He told me to never go into debt for anything unless it increases in value. For him, that meant you should borrow money for only one farming-related expense: your mortgage.

This was sage advice, and we tried our hardest to follow it. However, a few years down the road, circumstances were such that we really saw some advantages to acquiring debt.  It is a great achievement to start a farm and meet your financial goals, and we were able to do that in our first few years of running a farm. But then we wanted to expand, but did not foresee the addition of certain enterprises to our farm when we worked out our financial goals. So we had no way to expand without borrowing money. We wanted to import Kune Kunes to Canada, a very rare pig that has the ability to finish on grass! And we also wanted to start a herd of Red Poll cattle. Incidentally, breeding stock do increase in value, and so I felt I was still heeding Les’ advice in some way.

Tarrah and her darling Kune Kunes. Photo courtesy of Stone Stewart

When opportunities are timely, it might behoove you to borrow money when you hadn’t planned on doing so. Perhaps a new market has opened up and the early adopters are the ones that will see the greatest financial gains. While there may be risk involved, careful analysis might show you that borrowing money in order to take advantage of an opportunity is a good idea.

Years ago, I worked for a farmer who was an excellent farmer but had amassed a significant debt load. The farm was struggling on account of the large mortgage payments they were paying. The farmer had a lot of very good ideas, but they were big ideas that required a lot of capital. After a few years, the farm had taken on over $100,000 in debt, owed to friends and customers. The farmer likened the act of borrowing money to an addiction, saying “if I could just get a little more then I’d be able to fix this and get out of debt for good”. Unfortunately, the story does not end with the farmer repaying his debts.

Making the decision to acquire debt is a personal one, and everyone has different thresholds when it comes to risk. Whether you feel you are someone who is averse to debt or someone who sees it as a necessary part of doing business, make sure that you build your business and do your accounting with the assumption that one day you do plan to borrow money. That way, if the day comes when you want to borrow money, you will be prepared.