Colorado Lenders and State Programs
The Cash Flow Projection Every Lender Wants to See (and How to Build One)
If you only prepare one document before meeting a lender, make it the cash flow projection. It answers the loan officer's main question: when does money come in, when does it go out, and is there enough left to repay.
What is a cash flow projection, exactly?
It is a month-by-month plan of the cash you expect to receive and spend over the next year, with the loan included. For a cow-calf ranch the income often arrives in a lump at weaning, while costs such as feed, labor, fuel and vet work run all year. The projection shows the gap between those two rhythms, and the gap is what a lender is trying to understand.
It is different from a profit statement. A ranch can be profitable on paper and still run short of cash in March. The projection is built to catch exactly that, so you can arrange a line of credit or adjust spending before it happens.
How do you build one from scratch?
Start with last year's records. Pull your bank statements and tax return and list what you really received and spent by month. Then adjust for what will be different, such as herd size, hay prices or a new payment. Use a simple spreadsheet or a template from CSU Extension, and keep every assumption written down in a notes column.
Work in this order: sales first, then operating costs, then family living, taxes and debt payments. Add the proposed loan and its payment last, so the lender can see the effect. If you borrow for equipment, the farm equipment guide has useful ideas for estimating the true cost of owning machinery.
- Pull twelve months of bank activity
- List sales by month and by source
- Add operating, family living, tax and debt lines
- Show the new loan payment as its own line
What do lenders look for in the numbers?
They look for realistic prices, realistic yields and a cushion. If your projection assumes the best calf prices you have ever seen, the loan officer will quietly discount it. Using a lower price you could survive builds credibility. Lenders also check that the projected numbers connect to your history, so wild jumps need an explanation.
The second thing they look for is timing. Does the loan payment fall due before or after the cattle check arrives? A payment schedule matched to your sale dates can matter more than the rate. Ask each lender, whether a local bank, a credit union or a Farm Credit association, what payment structures they offer.
How do you stress-test the plan?
Make three versions: expected, low and very low. In the low version drop prices and add a little feed cost. In the very low version imagine a drought year where you pay for hay and sell some cows early. Check the U.S. Drought Monitor and your own records to see how often tough years have actually come.
If the plan falls apart in the low case, that is useful information. It may mean you borrow less, keep a reserve, or push the project back. Telling a lender about that thinking shows you are managing risk, and it is better to find a weak spot at the kitchen table than in July.
What mistakes make a projection less believable?
Common problems include leaving out family living costs, ignoring taxes, forgetting that interest and principal are separate, and counting on one-time income as if it will repeat. Another is mixing up accrual and cash numbers. Keep the projection on a cash basis unless your accountant says otherwise.
Round numbers are fine, but numbers without a source are not. Next to each estimate, note where it came from, such as a price report from USDA AMS or a quote from a supplier. A reviewer can then trace it, and so can you when the year goes differently than planned.
Where can Colorado ranchers get help and keep learning?
The Colorado Department of Agriculture and the Colorado Cattlemen's Association are good first contacts, along with an accountant who works with ranches. This farm money guide also covers budgets in plain terms. Remember that this site is an education resource and not a lender or an adviser.
Over at farm.FM they have a piece on a farm.FM look at ranch budgets and a good ranch economics and ranching section for context. A farm economics page adds national numbers. Always confirm current loan terms with your lender before you rely on a projection.
Sources and further reading
- CSU Extension: Colorado State extension
- Farm Credit: cooperative agricultural lending network
- U.S. Drought Monitor: weekly drought maps
- USDA AMS: marketing and market news
- Colorado Department of Agriculture: state agriculture agency
- Colorado Cattlemen's Association: state cattle organization
Ask locally: Ask your lender's ag loan officer, a CSU Extension ag business agent in Weld County, and an accountant who works with ranches.
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.