A Rancher’s Guide to SBA Loans for Agribusiness
The Small Business Administration does not lend money directly in most cases, and it is not the first agency many ranchers think of. But for some ag-related businesses, it can open a door that other programs do not.
What does the SBA actually do?
The SBA mostly works by guaranteeing part of loans made by approved private lenders, which can encourage them to say yes to small businesses that might not otherwise qualify. It also offers counseling and training. Programs, limits and eligibility rules change, so use the SBA site for current details.
That makes the structure similar to a guaranteed farm loan, with a different agency behind it. You apply through a lender, the lender decides whether to approve, and the SBA backs part of the risk. Ask whether the lender will walk you through the forms, because the first application is always the slowest one.
Are ranches eligible?
Eligibility depends on the type of business. Agricultural producers are often handled through USDA programs, and SBA rules treat some farm and ranch activities differently from other small businesses. Agribusiness enterprises, such as processing, direct marketing, agritourism, feed supply or equipment services, may be more clearly in scope.
Because rules are detailed, ask the lender and the SBA directly. A ranch with a side business, such as a meat shop or a custom hauling company, may have more options than a straight cow-calf operation. Do not assume either way.
- Value-added beef sales
- Custom services such as hauling or baling
- Agritourism and events
- Processing or retail ventures
How does it compare with FSA and Farm Credit?
FSA loans are built for farmers and ranchers, and Farm Credit specializes in agriculture. SBA loans are built for small business generally. For a pure ranching expansion you will probably start with FSA or Farm Credit. For a business that goes beyond production, SBA lenders are worth a conversation.
Compare rates, fees, terms, collateral requirements and the time each process takes. See the FSA loan pages and USDA Rural Development as well, since both programs can overlap with small rural business needs.
What will an SBA lender want to see?
A business plan, financial statements, tax returns, a cash flow projection, information about the owners and a description of how the money will be used. If the loan is for a new venture, they will also want to see your market research and experience.
Start building those documents early. The small farm information site has ideas for planning small enterprises, and this farm money guide covers budgets. Local CSU Extension agents may also provide business planning help. Expect questions on how the owners will be paid, how the business is organized and who the customers are, and have short, honest answers ready.
How should you prepare for the first meeting?
Bring your business plan, tax returns, financial statements, a description of the project and a list of questions. Ask the lender how many SBA loans they close in a typical year, what the fees are and what typical timelines look like. You are interviewing them as much as they are reviewing you.
Ask what collateral is expected and whether a personal guarantee is required. Many small business loans involve one, and it can put personal assets at stake. A licensed attorney can explain what that means before you sign anything.
What are common pitfalls?
The paperwork can be heavy, fees may apply, and not every lender is active in SBA lending. Ask early which lenders in the Greeley area participate and how many ag-related loans they make. A lender with experience will save you time.
Another pitfall is mixing the ranch and the new business so tightly that neither can be judged clearly. Keep separate records, and talk with an accountant about structure. The IRS has guidance for small businesses that may help with questions about how to organize.
Where do you start in Colorado?
Contact an SBA resource partner, a participating lender, your Colorado Department of Agriculture contact and your accountant. Compare more than one lender. For some reading, farm.FM has a farm.FM story on small business loans and a agribusiness section that tracks the economy.
Also see the ranching pages for stories from other producers. This site is educational and does not make or arrange loans. Verify terms with the SBA and a licensed professional.
Sources and further reading
- SBA: small business loans and counseling
- FSA Farm Loans: FSA direct, guaranteed, microloan and emergency loan information
- Farm Credit: cooperative agricultural lending network
- USDA Rural Development: rural business and community programs
- IRS: federal tax guidance
- CSU Extension: Colorado State extension
Ask locally: Ask a participating SBA lender, an SBA resource partner, your FSA county office and an accountant.
General education only, not financial, legal or tax advice, and Colorado Rancher Loan Guide is not a lender. Rates, terms and deadlines change, so confirm current details with the lender or agency.