Planning & Funding Your Farm Business

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How do I finance my farm startup?
If you’re a new farmer, your chances for success will be greater if you can avoid going into debt to finance your farm operation, since your initial profits can be reinvested in the farm rather than paying the bank. Credit cards, with their extraordinarily high interest rates, are a particularly dangerous way to finance your new enterprise. Think carefully and creatively about your options, and resist temptations to buy more and better equipment than you really need. Too many promising operations have been sunk by overcapitalization. Of course, some operations will benefit from a loan, especially if they have a solid business plan that exhibits a realistic strategy for paying it off. Learn more about specific strategies at Fact Sheet #4 Financing a Farm Operation in the Guide to Farming in NY.
How do I get a grant to start my farm?
Grants are almost never available to start a farm and are not a reliable strategy for growing your business. Grants may be a valuable resource once you’ve been in business for a while. They can enable you to expand a particular aspect of your business to make your operation more viable or provide funding to try a new practice on your farm.For a comprehensive list of grants available to farmers in NY (including Federal grants available to farmers in other states), download Fact Sheet #31, Grant Opportunities for Farmers from the Guide to Farming in NY.ATTRA (Appropriate Technology Transfer to Rural Areas) also maintains a rolling list of current grant opportunities for farmers and farm support specialists.
What kind of government incentives are available to me?
There are various types of cost-shares and payment programs available to farmers from the federal government. Keep in mind that there is no such thing as free money; pursuing any of the programs below requires a solid commitment of time and mountains of paperwork to secure any funds that are available. These programs are generally administered by your county Soil & Water Conservation District (SWCD), Farm Service Agency (FSA) or Natural Resources Conservation Service (NRCS). Locate your local office here and contact them to find out about deadlines, fund availability, and whether or not your farm qualifies for assistance.Information on incentive programs may be found at the Natural Resources Conservation Service websiteFinancial Assistance, Environmental, and Stewardship Programs
Agricultural Management Assistance (AMA)
Chesapeake Bay Watershed Initiative (CBWI)
Conservation Innovation Grants (CIG)
Conservation Stewardship Program (CSP)
Environmental Quality Incentives Program (EQIP) Air, Energy, Organic, and Forestry
Great Lakes Restoration Initiative (GLRI)
Wildlife Habitat Incentives Program(WHIP) Easement Programs
Farm and Ranch Lands Protection Program (FRPP)
Grassland Reserve Program (GRP)
Wetlands Reserve Program(WRP)Opportunities for “Historically Underserved” Individuals and Groups
The Farm Bill offers program opportunities for “Historically Underserved” individuals and groups. The Practice Payment rate for is higher than the general rate. More information is available at the NRCS Socially Disadvantaged, Beginning, and Limited Resource Farmers/Ranchers Web page.

What do I need to do to apply?
You need to complete form NRCS-CPA-1200, Conservation Program Application. Forms are available at your local USDA NRCS office, or you may download them from the Download Documents area of each program’s Web page. Applications are accepted on a continual basis, and are held for the next round of funding. For additional information contact or visit your local USDA NRCS office.

What are some options for borrowing money?
Farm Credit’s FarmStart Programhas a mission to provide investments of working capital in farm businesses and farmer cooperatives that show sound promise for business success. The program can make loans to beginning farmers who wouldn’t meet Farm Credit’s internal credit standards. It requires no down payment or equity for five-year loans up to $50,000, as long as the business cash flows and seems to have a good chance of succeeding.Farm Service Agency Beginning Farmer and Rancher Program – 315-477-6300
The Farm Service Agency (FSA) provides direct and guaranteed loans to beginning farmers and ranchers who are unable to obtain financing from commercial credit sources. A beginning farmer or rancher is an individual or entity who: (1) has not operated a farm or ranch for more than 10 years; (2) meets the loan eligibility requirements of the program to which he/she is applying; (3) substantially participates in the operation; and, (4) for farm ownership loan purposes, does not own a farm greater than 30 percent of the average size farm in the county. All applicants for direct farm ownership loans must have participated in business operation of a farm for at least 3 years. If the applicant is an entity, all members must be related by blood or marriage, and all stockholders in a corporation must be eligible beginning farmers.Commercial Banks
Most banks have a commercial lending department to handle business loans, but few banks have an agricultural lending department prepared to work with agricultural business. Check with your bank to see if they write agricultural loans (most will if you have a Farm Service Agency or Small Business Administration guarantee). Following is a partial list of NY banks with known agricultural lending departments:
Farm Credit East (860-741-4380)
M&T – 800-724-2440
NBT Bank- 800-NBT-BANKMicro-Enterprise Loan Funds or Revolving Loans Funds for Small Business
Some county governments have micro-enterprise loan funds with attractive interest rates and repayment terms that can be used to finance farm operations. Check with your county Planning and Economic Development Agency/Dept. to find out if they have micro-enterprise loans funds that you might qualify for. The Carrot Project is piloting a few such programs for small farmers in New England, with plans to expand to serve farmers in NY if their programs are successful.
What are some strategies for self-financing start-up?
Micro-scale Start-up
One way to manage risk and avoid debt at start-up is to start very small and keep reinvesting farm revenue to grow your operation over time. If you are buying an existing operation or seek to sustain yourself full-time in just a few years, this strategy will probably not work for you. But many new farmers find it works to grow their business as their skills grow.Residential Finance or Using Your Own Equity
While many banks are unwilling to lend money to an individual to purchase a herd of goats, for example, almost all banks offer home equity loans and/or other personal loans that you could use for your agricultural business. Home equity and personal loans may carry higher interest rates than business or farm loans available through lenders. Be sure to check rates and terms. Never finance a business using credit cards as interest rates are enormous and, if payments are not made, can quickly spiral out of control!If purchasing equipment or supplies (machinery dealers, a farmer selling animals, etc.) ask the vendor about their credit options and terms, as they may be more liberal than a commercial bank because they can easily seize and make use of the asset if payment is not made. Again, be sure you know the interest rates and terms. And be sure you have mapped out the cash flow of your business so you know you can afford to cover your payments.Custom Hiring
Don’t assume you need to buy a lot of fancy equipment right at the beginning. Carefully assess the functions you need to perform on your farm, and think creatively about the possible solutions. Instead of purchasing machinery or specialized buildings, consider options for local custom hire opportunities. It is often better to hire someone to provide a service than to buy expensive equipment that loses value over time and requires maintenance, repairs and inputs. For example, would a neighboring farmer be willing to work your fields? If you produce a value-added product, is there a commercial kitchen available for processing food? This would avoid the expense and regulation of building a commercial kitchen. Contact local farmers in your area, or your county’s Cooperative Extension office to find out what the custom rates and fees are for various types of farm work. Shiny Steel Disorder has sunk many a promising farm venture. Don’t succumb to the temptation to over-capitalize with expensive equipment or buildings, unless you have a well-researched business plan and can demonstrate exactly why you need to buy these things and how you will pay for them.
What business structure should I choose?
How do you want to organize your business? Depending on how many people are involved in your operation and what your goals are, this question may take some time to answer. You need to talk to key individuals who are or will be in the business to get their input. Advisors should be consulted to help you think through “what if” scenarios so the best type of business structure is established for you. A publication called Questions to Consider When Starting or Restructuring a Business is available for download (PDF) for you to get some ideas on business structures. Visit Cornell’s Business Structures Strategieswebsite for more information on this topic.In the beginning, most farms are sole proprietorships, so if this sounds like you, you may not need to spend much time on this question up front. If you are a sole proprietorship, or even a partnership, the only thing you need to do to formalize the farm is to register a DBA (“Doing Business As”) form with your County Clerk, and set up a separate farm business bank account at your financial institution.Many farms choose to organize as an LLC (Limited Liability Corporation) to protect the family’s assets in the event of a lawsuit against the farm.Farms with a specifically charitable or educational purpose need to apply to the IRS for 501(c)3 status, a process that can take several years.

How can I start to put together estimates of potential costs and revenue?
Good question! It’s not easy, but you probably already know that. We’ve listed some of the best enterprise budgets we (or other people) have collected online, along with advice on estimating costs and revenue, within the Choosing an Enterprise tutorial. The final step of deciding what to grow is to ask the question, but Does it Make Financial Sense?Here you’ll find lots of suggestions and links to help you, but there are just no easy answers. You will need to do a lot of research and leg work to get accurate ideas of the profit potential–for your farm and your markets–of what you want to grow. Several of our online courses, including Poultry Production and Vegetable Production, offer the opportunity to develop a customized enterprise budget with guidance from a Cooperative Extension educator. Remember that the first year is the hardest, because you have to create all the numbers from scratch, but after that you’ll always have real numbers to work from, and to improve upon, so that by year 4 or 5 you will have a clear idea of your farm’s profitability. Keep in mind too that it’s a good idea to manage your expectations: most farms take 5-7 years to achieve profit. Be sure to plan for other income sources to keep you going through start-up.
Why bother with a business plan?
The idea of spending time in nature, working with soil, plants, and animals to produce food for people has enormous appeal, especially since most of us are several generations removed from farms. But if you intend to sell any of your bounty, it is important to get past the romantic idyll of farming and do some research to see how feasible your ideas are. Many new and especially small-scale farmers don’t think of their farm as a business. But we often hear from more experienced farmers “If I had treated my farm as a business and made smarter business decisions from the beginning, I would be in better shape now.”If your farm start-up will require a loan, you will need to have a solid business plan in place. But even if you are self-financing your operation, it’s a really good idea to have at least an outline of a plan, to demonstrate the feasibility of your idea. Even if your farm will not be your primary income source, the sooner you learn to think of it as a business, the more successful you are likely to be.
Is there a “business plan lite” that I can use?
Yes, many successful farmers end up with several business plans. The “lite” version is often used internally, while a more comprehensive plan with visual appeal might be used externally for potential lenders.Completing the worksheets in each of the tutorials in the New Farmer Hub will get you a “lite” business plan, with: vision, mission, goals, basic production plan, basic marketing plan, and enterprise budgets.For more detailed business plan templates, visit the links on the left.
What can I do to achieve or improve profitability?
Visit the Improving Profitability Tutorial for exercises and information to help you work toward a level of profitability that is sustainable for you.
What types of insurance should I have?
Please read the Farm Risk Management and Farm Insurance fact sheets in the Guide to Farming in NY.

Getting Started with Your Farming Business

Twelve NY farmers discuss how they financed their start-up and offer tips for those just beginning.

Visit the video gallery to view other videos.

Get Started Here

A farm business plan is not nearly as scary as it might sound. It’s simply a document that any business owner puts together to demonstrate that they have thought through their goals, how they’ll produce their product, where they’ll sell it, and that they can make money doing it. If you will seek loans for your farm, you will need a business plan!

This site is set up to help you lay the foundation for a business plan. It’s easy!

1. Start Planning Online. Use the online worksheets that are integrated into the tutorials on this site’s New Farmer Hub to begin recording information that you can plug into a formal business plan later. You can edit your worksheets at any time and download them as PDFs when you’re done working on them. When complete, these form your pre-business plan, or “lite” business plan.

2. If you’re ready for a full business plan, choose a template and download it to your computer. You can type directly into it or copy and paste responses from your pre-business plan worksheets. If you need inspiration, check out the sample business plans.

The worksheets on this site will not cover all the necessary areas of a business plan – if you’ve never done it before, writing a full plan may require some additional assistance. Visit the Who Can Help section of this site, as well as the Other Local Contacts to find organizations that may be able to give you one-on-one help in writing your plan.

Grants

There are some grants available for farmers, but they require a lot of work, often have delayed payments or require up-front investment, and are not a reliable source of income. But for some farmers, they can help you realize critical pieces of a business plan.

Visit the video gallery to view other videos.

Next Steps

If you haven’t thought carefully about why you want to farm, what you need or want to get out of it, and how you envision your farm to be, go back to the first tutorial in the New Farmer Hub, Getting Started. Having your goals written is the first step to writing a plan for your entire farm, which will enable you to determine the feasibility of your ideas. Through the Goals, Skills and Resources tutorial you will also do a personal inventory of the skills that are useful in operating a farm business. The inventories will help you learn where you might need to spend energy enhancing a skill as well. Visit the Getting Started section now to begin working on your Goals, Skills and Resources.

In this section:

Need Small Farms Info?

Visit our sister Small Farms Programsite, the Cornell Small Farms Program