Colorado Lenders and State Programs

Farm Credit of Southern Colorado: Equipment, Operating, and Real Estate Products

Equipment, operating and real estate loans solve three different problems on a ranch. Knowing which one fits which job keeps you from borrowing short money for a long purchase.

The three loan families in plain terms

Ranch lending usually sorts into three buckets. Equipment loans finance trucks, trailers, balers and tractors, with the machine as collateral. Operating loans cover the year's expenses like feed, seed, vet bills, hired help and fuel, and are repaid when cattle or crops are sold. Real estate loans finance land and buildings over many years.

Matching loan length to asset life is the rule that matters most. A baler that lasts a decade should not sit on a twelve-month note, and a pasture purchase should not be paid off from a one-season operating line. The details of any actual product at the association named in our headline should be confirmed with that association directly.

One more habit helps: write the purpose of the loan in a single sentence before you walk into any office. Something like financing a used stock trailer over five years, or covering spring feed and vet costs until fall calves sell. A clear purpose makes it easier for a loan officer to point you to the right product and keeps you from drifting into a loan that is bigger or longer than you need.

How the Farm Credit system fits in

Farm Credit associations are borrower-owned cooperatives that lend to agriculture. The system is regulated by the Farm Credit Administration, and the national network is described at Farm Credit. Each local association sets its own product menu, so what one association offers may differ from the next. This site is independent and is not affiliated with any lender.

Because members of a cooperative can share in earnings through patronage in some cases, ask how that works and whether it is paid in cash or stock. Do not assume. Ask for the policy in writing and compare it to the rate you would pay elsewhere.

Equipment loans: questions to ask

Start with the useful life of the machine and the likely resale value. Lenders commonly ask for a down payment, though the amount is a conversation. Compare the loan with leasing and with a manufacturer's financing offer, and look at total cost, not only the monthly payment.

Ask whether there are prepayment penalties, and whether the rate is fixed or variable. If a good hay year lets you pay early, you want that option. A beef producer in the Southern Colorado high desert has different cash timing than a Greeley feedlot, so build the schedule around your own sale dates. The ranch and beef cattle guide covers typical operating cycles.

Remember that the machine will lose value while the loan is outstanding. Ask what happens if the equipment is damaged or stolen, and whether the lender requires you to name it on your insurance policy. These are ordinary questions, and a loan officer expects them.

• Fixed or variable rate?
• Prepayment terms
• Insurance requirements on the equipment
• Down payment and collateral rules

Operating loans and lines of credit

An operating loan or revolving line is built for seasonal cash flow. Expect to provide a balance sheet, income and expense history, a production plan and often a cash flow projection. Drought years make projections harder, so show a range: a base case and a poor-rainfall case. Lenders tend to respect an honest downside scenario.

Many operating lines renew annually. Ask when the review happens and what documents you need beforehand. The Farmers.gov loan pages and FSA loan basics are handy comparison points, since a federal program sometimes works alongside commercial credit.

Real estate loans and long-term planning

Land loans bring appraisals, title work, environmental questions and sometimes water rights into the picture. In Colorado, water can be worth as much as the dirt, so ask your attorney how ditch shares or wells are treated in the collateral package. The Colorado Department of Agriculture and CSU Extension publish ranch management resources that help with planning.

Long-term loans have fixed or adjustable pricing, amortization periods, and balloon features in some cases. Ask for an amortization schedule and a sample payment at a rate two points higher than quoted, so you see the stress case before you sign.

Bring the same documents to each meeting so the comparisons are fair: recent financial statements, tax returns, a list of existing debts and a short narrative about your operation. Taking notes in the same format at each stop makes the final decision much easier. The ranching stories at farm.FM also cover how operators think about borrowing.

How to compare before you apply

Talk to at least three sources: a Farm Credit association, a local bank or credit union, and the FSA county office. Line up their quotes side by side on rate, fees, term, collateral and covenants. Over at farm.FM there is a lively ranch finance section, and farm economics coverage is good background reading between meetings.

For general vocabulary, see this guide to farm money basics. This page is education only, not financial or legal advice. Talk with a licensed professional before borrowing. For a lighter read, try a farm.FM story on tractor payments.

Sources and further reading

• Farm Credit Administration: regulator of the Farm Credit System
• Farm Credit: cooperative agricultural lending network
• FSA Farm Loans: FSA direct, guaranteed, microloan and emergency loan information
• Farmers.gov Loans: USDA farm loan overview and loan assistance tools
• Colorado Department of Agriculture: state agriculture agency
• CSU Extension: Colorado State extension

Ask locally: Ask a Farm Credit loan officer, a Colorado ag banker, or your CSU Extension office to walk you through current product terms.

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.