In a time of extended low commodity prices and pressures from tariffs, farmers, ranchers, and landowners can be at an increasing risk for bank foreclosure. New farmers or those wanting to expand their operation may have trouble securing credit because of decreasing profits and tightening lending standards. According to the USDA, overall net farm income is expected to decrease 13% this year from 2017. What other options can you investigate before giving a bank control of your land? A viable choice for some producers is to raise money from equity investors.
Why should farms take on investors?
Though it may not be traditional, offering equity to investors is a much safer form of debt than going through a bank and taking out a huge loan. Many farmers may fall on hard times and the funds needed to buy additional crops, seeds, or equipment just aren’t there. An investor’s money is allocated for the purpose of expanding the farm, and can be used specifically for those items. This is an opportunity to buy the more up to date equipment you need, increase the amount of crops you grow, or increase the size of your livestock herd. When the farm expands, both you and your investing partner win.
Are there disadvantages to farms taking on crowdfunding investors?
There is a lot of apprehension around giving investors a certain amount of equity in farmland and disrupting traditions. Will you lose control of your land? Will the family farm lose it’s sentimental value and become another faceless big business? What kind of pressure is put on the farmer to communicate with the investor?
Allowing someone to invest in your land does not mean that you lose control of it’s operations at all. We vet our investors and make sure that they are experienced and understand the terms of this agreement. The investor is a passive, general partner. They do not have any voting rights or any say in how the farm is run. Harvest Returns creates clearly structured contracts that protect both the farmer and the investor so there are no misunderstandings.
Taking on an investor is also a much more intimate route than taking out a loan from a big bank. The bank doesn’t care how your crops or livestock are doing, they just want you to make your payments and won’t think twice about taking your farm if you fail to do so. They are not funding your growth.
An investor, however, will be much more interested in how the farm is operating. This method does add more accountability to your plate, you will want to report on updates for your crops or livestock, what your yields are looking like, and other things of this nature. However, this is all done in the interest of growing your farm and making sure you have the means to do so.
Harvest Returns Connects Reputable Farmers with Experienced Investors
We connect farmers who are ready or interested in growing with experienced investors. We’re looking for farmers, growers, ranchers, and landowners who are interested in trading equity for cash that can fund their growth, all while maintaining control of their farm. We are also an excellent resource for young farmers who are unable to get traditional agricultural credit. The tried and true isn’t always the best route, there’s a better way.