Personal credit impacts business financing

A person using a mobile pay credit card application


There’s no question that agriculture is a capital-intensive undertaking, so the ability to obtain credit is essential. Unfortunately, this can sometimes be a challenge, in part because an individual’s personal credit score can impact a lender’s review of a loan request.

Three different credit scenarios can cause stumbling blocks, though it’s important to understand that how the situations are handled is even more important than the situation itself. Lenders have some degree of latitude in making credit decisions, so demonstrating responsibility, honesty and a proactive approach to settling a negative credit situation can go a long way to securing your business financing.

Lacking a sufficient credit history

Credit scores are built over time with the responsible use of credit and consistent on-time payment of credit obligations, so it stands to reason that a younger operator may simply have not had the time to do that. In this case, the lender will look beyond the credit score to determine how any existing credit obligations have been handled. Certainly making timely payments on consumer debt is essential.

Most lenders believe that the way an individual handles things from early age will likely stick with them for the rest of their life, so demonstrating commitment to these financial obligations when young offers the lender some degree of confidence that a new loan will also be repaid responsibly.

The lender will also determine how consumer debt was used – did the borrower buy a used pickup truck for the farm or a speed boat for fun? Using credit as a tool rather than a convenience speaks to a conservative financial outlook that is appealing to a lender.

A negative or difficult financial situation

Maybe they’ve missed a series of payments on consumer debt, or they’ve had a car repossessed for lack of payment. Mistakes happen, but how they’re handled means a lot to a lender. Does the borrower admit the mistake, take responsibility and tackle the situation head on to make good on their obligation? Again, for a lender, how someone has handled a situation is a fair indicator of how they’ll handle future obligations.

There are also strengths that can outweigh such credit weakness, such as completing an educational degree, getting a good job or having a spouse with strong credit who is also committed to the agricultural operation. If the potential borrower can document that things are now going in the right direction, the lender is more likely to offer credit, perhaps a smaller loan that will allow the borrower the opportunity to build their financial reputation and earn additional credit over time.

A parent has borrowed in their children’s name and handled that loan inappropriately

This situation is less common, but it does happen. Starting out with the best of intentions, parents can end up ruining their children’s credit. Few children will want to pursue legal action in this situation, so it’s up to them to come clean to the lender, explain the situation and start taking steps to rebuild their credit.

Regardless of the situation contributing to a low credit score, the bottom line is that whether a borrower is applying for their first loan or is expanding an established operation after 30 years, it’s never too late to demonstrate responsibility and work to build a positive financial reputation so you can obtain credit, grow your wealth, and be positioned to take advantage of opportunities when they arise.

United FCS to pay out $6 million in cash patronage


CONTACT: Adam Ulbricht


Willmar, Minn. – United FCS member-owners will soon receive patronage checks, as the Association announces a return of $6 million. The payout follows another strong year, despite challenging market conditions.

“The ag economy is not where a lot of farmers would like it to be right now,” said Bradley Sunderland, chairperson of the Board of Directors. “However, agriculture is a resilient industry, and I believe our patronage payout serves as a positive for our members.” 

The Cooperative has now returned over $84 million to members since 2002. This is the fourth consecutive year $6 million has been paid out in cash patronage.

“Our steady approach to serving farmers and rural communities continues to provide great value to our member-owners,” said United FCS CEO Marc Knisely. “We are pleased to share our success with those that help make it possible.”

Members will be able to pick up their checks during the Association’s patronage open house event on Thursday, February 23. Remaining checks will be mailed out.

About United FCS:

United FCS is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture and the nation’s rural economy. Serving over 6,000 member-owners and with over $1.7 billion of assets, United FCS has a primary focus in a 22-county service area in West Central Minnesota and North Central Wisconsin providing loans, leases and a wide array of financial services through 12 branch office locations and 190 locally-based employees.

5 steps in effective succession planning

Three generations of farmers standing in front of a combine


As agricultural producers start to think about planning for the eventual transition of their operation to the next generation, there are five essential steps that will facilitate a smooth transition and help ensure the financial stability of all involved.

Build a thriving, profitable business. Yes, this is what most businesses aim for, but with agricultural operations, which demand extreme dedication of time and resources, it is even more essential. For one thing, having a profitable business will entice the next generation, family or otherwise, to be interested in taking over rather than pursuing an off-farm career.

A farm is a business like any other, and if a non-family member wouldn’t be interested in purchasing your operation because it’s not profitable, it’s also likely that a family member won’t be, either. That’s not to say that they won’t, but they may be doing so out of obligation rather than passion, which will impact both their long-term success and their quality of life. For the older generation, having a profitable enterprise will mean resources to finance their retirement.

Practice mutual respect. Inter-generational working relationships can be challenging whatever the situation. In many cases, the older generation doesn’t feel respected for their experience and knowledge, and the younger doesn’t feel respected for their new ideas and passion. Even if these opinions don’t actually exist, the perception that they do can be crippling to a smooth transition. Both generations should proactively demonstrate their respect for the other, with the older listening to and perhaps finding initial, small ways to implement new approaches and the younger taking the time to listen and learn from their elders.

Create and communicate a formal, written succession plan. When it comes to the safe transfer of the business you’ve built with blood, sweat, money and maybe even tears, there’s no room for casual ideas about how you’ll pursue the transfer when it comes time to retire. Instead, protect your lifelong investment by carefully planning how you’ll manage the transition, from transfer of management responsibilities to transfer of assets.

Once you have your plan together, share it with all involved parties, including your immediate family members, other relatives who are actively involved in the operation and your employees. You may also want to share it with your accountant, your banker and your attorney.

Define your retirement needs and set your retirement date. Obviously, everyone is going to stop working someday, but not knowing when that day is can cause stress to you, your spouse and your family. Having a firm target date helps alleviate the stress of not knowing, drives transition activities, and holds everyone accountable for their part in the transition.

Start early for a gradual transition process. Without question, agricultural operations are complex. There are the nuances of caring for crops and livestock, the savvy to market and sell, the challenge of business and financial planning and reporting, government regulations to abide by, not to mention labor issues, market conditions and the ever-present concern over weather.

Amidst all this, transitioning an ongoing operation is a highly involved process, so starting early and managing the process over time – even decades – will help protect both the operation and the stress levels of everyone involved. Your transition plan (see Step 3) should outline the process you’ll follow and let everyone know what’s expected. Stick with the plan and the timeline, and enjoy your retirement when the day comes.

If you’d like help in establishing a succession plan, please contact your local United FCS office. Be sure to also read past succession posts by clicking here and here.

Choosing the right financial partner

Two smiling farmers meet with their lender


Finding the right lender for an agricultural operation is a key business decision that can impact the success of an operation. Because of the high capital needs and the cyclical nature of agriculture – as soon as one season is over, preparation for the next begins – farmers and ranchers are best served when they find a lender with whom they can work long-term, both working together for the producer’s success.

Building a strong lender relationship can happen quickly or it might take some time, but there are several essential aspects to achieving this goal.

  • Dependability: We all know that agriculture has its ups and downs, and a situation that benefits one sector might create a challenge for another. Farmers and ranchers should look for a lender that will stand by their side even during a difficult or challenging economic environment.
  • Consistency: The right lender will treat their customers consistently through whatever opportunities might present themselves. For example, underwriting standards shouldn’t constantly change because the land market goes up or down, or corn prices become volatile, or cattle prices rise or fall.
  • Communication: Lenders need to be clear about what information they need and when, setting the stage for both parties to know what to expect. The lender should also clearly explain financial expectations, such as the owner-equity ratio necessary for future loans so the producer knows what he or she needs to work toward. The customer, meanwhile, should feel comfortable sharing their long-term goals so the lender can work on their behalf to help achieve them.
  • Commitment: It takes a lot of hard work to succeed in agriculture, but working with a lender who is committed to your success can make it that much easier. This commitment means proactively reviewing customers’ operations and the broader lending environment, and presenting ideas that will benefit the customer – suggesting refinancing of loans when interest rates drop, flagging any areas of potential concern in the balance sheet before they become a problem, or setting loan terms that the customer will be able to meet such as matching payments to anticipated cash flow. The lender should also sometimes challenge their customers, helping them think differently about what might be possible.

When both the lender and the borrower display the characteristics outlined above, they’ll build the most important feature of any strong relationship: TRUST. With a trusted financial provider by their side, agricultural producers can be more confident in managing their operations, capitalizing on opportunities and planning for the future.

At United FCS, we serve 22 counties in Minnesota and Wisconsin. You can find one of our 12 conveniently located offices by clicking here. To find other local Farm Credit lenders, visit

What to expect when applying for a loan

A farmer and lending shaking hands


Agriculture is a capital-intensive business, and for most operators, especially new farmers and ranchers or those looking to undertake a significant expansion, meeting these financial needs means applying for a loan. Applying for a first loan can be intimidating, but with adequate preparation you and your lender can determine the feasibility of your loan application and help get you started down the right road to success in your agricultural endeavors.

When you first call your local Farm Credit office, you’ll be put in touch with one of our experienced loan officers, all of whom understand the unique demands of agriculture and many of whom also have expertise in specific sectors of the industry. The loan officer will ask you a few questions to gain a general understanding of your loan request, and will schedule an appointment with you to discuss your financial plan and business operation in more detail. They’ll also tell you what information and documentation to bring to that meeting so you’ll be prepared for the discussion. The size and complexity of the loan will determine how much information you’ll be asked to provide, but the documentation requested will usually include:

  • Financial statements, including balance sheet
  • Historical earnings information, such as tax returns or business records
  • Business plan including description of your operation, your cash flow projections and your marketing plan
  • If applicable, information on any assets that you’re looking to acquire
  • For real estate loans, a purchase agreement, legal description of the property, description of any water rights, and listing of any assets that are included in the purchase (irrigation equipment, barns or other structures, etc.)

During your meeting, you’ll review the information with the loan officer and be asked to fill in any details. In general, your goal in this meeting is to demonstrate a well thought-out plan for what you’re trying to achieve and how you plan to get there. The loan officer will also have you sign authorizations to allow the bank to run credit reports and verify your assets.

After the meeting, the loan officer will review your documentation and business plan, run credit checks and other verifications, schedule any needed collateral appraisals and compare financial ratios based on your financial statements against the lender’s underwriting standards. A big part of the loan analysis will be centered around the Five Cs of Credit: Character, Capacity, Capital, Collateral and Conditions. From this analysis, the lender will determine whether or not to approve the loan application.

If the decision is made to provide the loan, the lender will present the borrower with a loan offer which will include proposed terms and conditions. The lender and borrower should discuss the loan offer and determine if the structure and conditions meet the needs of both parties.

If the loan is not approved, the lender will usually explain the reasons behind that decision, and what steps the borrower can take to have the loan approved in the future. For example, the loan size might exceed the collateral value, or the borrower may not have enough equity in the operation, conditions that may change in the future.

For more information or to discuss a new loan, contact your local Farm Credit lender.

Understanding lines of credit

A herd of brown beef cows


Whether they’re beginning farmers or well established operations, many producers use lines of credit as an effective agricultural financing tool to help smooth out the variable cash flow of the typical annual production cycle.

Particularly at the beginning of the year, grain farmers need significant amounts of money for seed and other inputs, and then reap the reward come harvest; cattle stocker operations need to buy calves, pay to feed them during their growth cycle, and then have an influx of cash when they sell their herd to the feedlot; produce growers have expenses throughout the growing season, but receive income during the short harvest season.

A line of credit is effectively a short-term farm loan, but one that the borrower doesn’t receive in a lump sum. Instead, withdrawals and payments can be made throughout the year. Once the line of credit is approved, the money is available for use and the borrower doesn’t need to have any further conversations or approvals to use the funds; instead, the funds may be deposited in to a checking account or the farmer may write drafts against the line of credit as needed. There are typically no limits to how many times the funds are accessed, or how much is drawn out at any one time.

Lines of credit for production agriculture are typically tied to a particular farming or ranching activity and the value of the crop or product that’s being produced. For example, a line of credit taken out to cover crop input expenses is expected to be paid back using the profits from the sale of that crop.

Like a loan, when seeking a line of credit your lender will expect a business plan or a projection of how the money will be repaid. Collateral to secure the line is also likely to be needed, though this collateral can be as simple as a lien on what’s going to be sold. And interest is only accrued on the money that’s been drawn out, not on the entire amount available.

A producer can often have more than one line of credit, each designed for a particular use or particular year’s crop. This is often the case for commodity farmers whose crops can be stored waiting for better prices: the line of credit for one year may wait to be repaid before a second line of credit for the next year’s inputs is needed. Some ranchers like the clarity of having separate lines of credit for distinct groups of animals: this line of credit goes with that pen of calves.

Beyond offering liquidity when it’s needed, one of the benefits of using lines of credit is the strength of the relationship built over time between the borrower and the lender. Particularly with a 12-month line of credit, the annual meeting helps deepen the understanding of the borrower’s operation and creates a foundation of trust that can help both borrower and lender weather unexpected situations. For Farm Credit, this builds on our commitment to provide consistent and dependable financial support to U.S. agriculture through good times and bad.

Keeping turkeys warm in the winter

A turkey barn covered in snow and ice

Image courtesy of WingTips Blog


By Pete Klaphake,

Keeping a constant eye on the changes in the weather is something I have gotten really good at over the last 10 plus years.  Thanks to modern technology, it is very simple to do from anywhere.  We use smart phones, tablets and computers to check if temperature patterns or winds will change over the course of a day, or especially overnight.

Turkeys are very susceptible to changes in temperature and in wind direction.  Our barns do have some automatic curtains and fans, and heaters are set to start and stop according to conditions in the barns. But many barns still have some doors and vents that are manually opened and closed each day.  This is the most important job a turkey grower has: manage the air in the barns.

We have a philosophy that there are three things that a turkey farmer needs to be able to successfully manage to make sure conditions are right for the birds to meet their optimal growth potential.  They are:

  1. Air conditions
  2. Water quality and availability
  3. Feed quality and availability

The bottom line for turkey growers is greatly affected by the management of these.  Usually, the larger the bird at market, the better the return, and I don’t know of too many farmers, or any business owners, who don’t do what they do in order to make a profit.

A group of turkeys

All this being said, the last week has been tough to look at the weather. Winters can be tough doing what we do. When cold spells come there usually is a similar pattern, and I have to cope with extended forecasts. I first look ahead and see that it is going to start getting cold. Then I recheck the forecast later that day or within the next couple days to see if they made a mistake. Afterwards, I usually get sick of thinking about what is to come and concentrate on what we have to do to be ready to handle it.

Making sure all heaters are working along with making sure all doors, vents, etc. are sealed up tight are some of the things we check on when weather turns bitterly cold.  Rearranging plans we had for outside projects, moving birds from barn to barn, rebedding barns with wood shavings to keep them dry, and anything that can be rescheduled for a better time are usually done when it works. 

Sometimes schedules do not allow us to do this, so we have to do bear down and do it in the cold but we always try to keep in mind what is best for people and turkeys. Storms and extreme weather patterns make for some very long days at times, so we also have to be sure to manage our own well-being. I am always grateful for the efforts put forth by people who work for us, but during times like these my gratitude goes to another level.

Please remember as you buy and consume meat protein products that there are countless hours involved in getting these products to you, and a lot of these efforts never get recognized. In fact, they are more often scrutinized. Please take the time to thank farmers for what they provide for all of us.  As I’ve long said, I am “Proud to be a Part of the Ag Industry”.

This article originally appeared on the Minnesota Turkey Grower’s WingTips Blog. Pete Klaphake is a turkey grower near Melrose, Minnesota.

Off-farm experience can improve generational transfer

A smiling father and son on a farm


Farming and ranching take commitment, and when it comes to passing on an operation they’ve spent their lifetimes building, most producers want to make sure it’s going to someone who is qualified and who’s as committed as they have been.

Ideally, many hope this is their children. One way to make sure that they’re the right people to take over your family operation is to require that they go off-farm for education or work experience.

When your goal is to transfer the farm to your children, it may seem counterproductive to send them away from it. Keep in mind that ultimately you want both your children and your operation to thrive, and off-farm experience can help a generational transfer in several ways.

First, you want to know that the next generation truly is interested in, and committed to, taking over your operation. If they remain on the farm, there is always the question of whether they’re staying out of obligation or because they don’t believe they have any choice. By encouraging them to try other options, when they come back to the farm you’ll know they mean it.

Secondly, when they come back they’ll be brimming with ideas and armed with experience, which can only benefit you and the future of your agricultural legacy. Whether these insights come from university classes, experience on another farming operation, or work in another field entirely, your next generation will come home knowing more about working with different people, managing and resolving conflict, communicating effectively or implementing industry-leading, cost saving processes.

Some agricultural families like Talbot Farms embrace the benefits of off-farm experience to the point that they require it of any family member considering joining the operation. The Kunde family, owners of Kunde Family Estate and Kunde Family Estate Vineyards, also requires the next generation to go out in the world before joining the family company.

As you’re building your succession plan, consider including provisions for education or off-farm work experience so you and your children can gain the same benefits. Then, when the time comes, you’ll know that your children are committed, and you’ll benefit from all that they’ve learned.

If you have any questions about the succession of your farm, or would like help putting together a plan, be sure to contact your local United FCS office. As we’ve discussed previously, it’s important to have a succession plan in place for a whole host of reasons. Give your self peace at mind by being prepared!

Ashley Kieke joins UNITED FCS

Contact: Lynda Hauge, HR Director
United FCS
(320) 214-5007

A headshot of Ashley KiekeDecember 22, 2016 – Ashley Kieke recently joined United FCS as a Tax Accountant and will be based in the Litchfield, Minn., office. As a tax accountant, she will provide accounting services work for Willmar and Litchfield customers; including tax planning, tax preparation, farm records, and consulting.

Kieke earned a Bachelor of Arts Degree in Accounting from the University of St. Thomas in St. Paul. She is a Certified Public Accountant (CPA) and most recently worked in an accounting firm in the twin cities. Ashley and her husband farm near Kimball.

United FCS is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture and the nation’s rural economy. Serving over 6,000 customer-members and with over $1.7 billion of assets, United FCS has a primary focus in a 22-county service area in West Central Minnesota and North Central Wisconsin providing loans, leases and a wide array of financial services through 12 branch office locations and 190 employees.

Agriculture and the holidays

A wreath tied onto a fence post in winter


The holiday season is upon us. This time of the year can be hectic, whether it’s finding the perfect gift, preparing a meal, or decorating your home. What we may not recognize is the important role agriculture plays in our seasonal celebrations.

Soon, people everywhere will be gathering with their families to commemorate the holiday. With these celebrations typically comes a hardy meal or two.

Often times, Thanksgiving is thought of as the largest eating holiday in the United States. But if you went by calories consumed, Christmas quite literally takes the cake with the average person consuming a whopping 6,000 calories!

Let’s get into the festive spirit and see what role agriculture plays this time of year.

All natural decorations

We’ll start off by looking at the decorative side of the holiday season. When you picture a winter holiday, what do you think of?

The most visible sign of the holidays is the Christmas tree. According to the National Christmas Tree Association, each year approximately 25 to 30 million real Christmas trees are sold in the U.S. There are over 15,000 Christmas tree farms across all 50 states, employing roughly 100,000 people.

Locally, Wisconsin ranks as one of the top Christmas tree producing states. The latest data shows that over 657,000 Christmas trees were sold in the Badger State in 2014, totaling around $16.2 million in annual sales. Beyond just trees, the State’s 868 Christmas tree farmers also produce around 600,000 wreaths. Altogether, over 23,600 acres within the state of Wisconsin are dedicated to Christmas trees.

The main course: Decisions, decisions

When it comes time to eat, there seems to be two popular choices for a main course – ham or turkey. Statistics vary for which meat is the most popular dish on Christmas.

Now we’re not saying these are the only two meats consumed. There are plenty of other great choices, such as beef or any variety of specialty meats. Any way you look at it, you really can’t go wrong. But for the sake of this post, we’ll be featuring the two most prevalent choices.

Nationwide, Americans purchase an estimated 318 million pounds of ham around the holidays. When it comes to pork, Minnesota is in a virtual tie for second place behind neighboring Iowa. That means odds are good that the ham you eat might have been produced in Minnesota.

As an industry, there are over 3,300 hog farms in the state of Minnesota. Of those farms, a gross income of $2.6 billion was generated in 2013. The State’s pork industry creates an estimated $7.28 billion of economic activity.

On the other hand, over 22 million turkeys are consumed each year by Americans for the Christmas holiday. In 2015, over 230 million turkeys were produced for consumers in the U.S. Minnesota sits atop of all other states as the king of turkeys. The State ranks number one with over 46 million birds raised annually.

This industry alone generates over $600 million in income. Overall, the most recent University of Minnesota study showed that the turkey industry provided over $800 million in economic impact, leading to $17.46 of direct economic activity to the state.

Don’t forget the spuds…

Those are some pretty impressive numbers, but we can’t forget to talk about the side dishes. As a kid, you may have been told by your parents to eat your meat and potatoes. Clearly Americans listened, because potatoes are typically a popular choice to accommodate holiday meals.

Nationally, the U.S. produces over 43 billion pounds of potatoes annually. Both Minnesota and Wisconsin rank in the top 10 for potato-producing states. Wisconsin trails only Idaho and Washington by producing nearly three billion pounds. Minnesota comes in at number seven with just under 2 billion pounds. So whether you like your potatoes mashed, baked, or cut up into fries or chips, look for something homegrown this holiday season!

Remember, as you celebrate the holidays this year, take some time to appreciate all that agriculture provides. Even though you can’t always see it, a lot of hard work was put in to making sure your family has a delicious meal on the table and a Christmas tree in your home.

From all of us at United FCS, we wish you happy holidays and a merry Christmas!