Colorado Lenders and State Programs

Revolving Lines of Credit Under Colorado’s Ag Future Loan Program: Up to Five Years

A revolving line lets you borrow, repay and borrow again. The headline mentions a line of up to five years, so here is how such lines work in general and what to confirm.

What revolving means

A revolving line of credit works like a flexible account with a limit. You draw money when you need it, repay when cash arrives and can draw again, up to the limit. Interest is charged on what you owe, not on the whole limit. Ranchers use lines to bridge the months between expenses and sales.

The headline's five-year length is as reported, so confirm the term and rules with the program's official source and the lender. A longer term does not mean you can borrow without review. Lines usually have conditions.

Ask whether the line is a single commitment for the whole term or must be renewed each year. Those are very different promises, and only the document tells you which one you have. Request that answer in writing.

Why a ranch might want a line

Ranch income is lumpy. Calves sell in the fall, but feed, vet and fuel bills arrive all year. A line can cover those gaps without a new loan each time. It can also give you room during a dry year when hay costs jump.

The danger is treating a line as free money. A line that is drawn all year and never repaid is a sign the operation is losing money, and lenders see that quickly. Pair a line with a realistic cash flow budget.

Run a simple example, clearly as an example: imagine you draw on the line each spring for feed and repay when calves sell. Plot the balance month by month. If the balance never gets back to zero, talk to your lender and adjust the plan before the lender does it for you. The CFPB also publishes plain guides on credit line basics.

• Seasonal feed and hay purchases
• Vet, fuel and labor costs
• Short-term operating gaps
• Drought contingency

Terms to ask about

Ask about the interest rate and whether it floats, any fees for opening, renewing or unused balances, and how draws are made. Ask about the borrowing base: some lines limit what you can draw based on inventory or receivables. Ask when the lender reviews the line and what could lead to a reduction.

Also ask what must be repaid each year, if anything. Some lines require a period each year with zero balance, called a clean-up period. Knowing this affects how you plan your calendar.

Ask how quickly draws are funded. In a pinch, a three-day delay on a feed purchase can matter, and online access, a phone call or a branch visit may each work differently.

Collateral and covenants

A line is usually secured by cattle, crops, equipment or land. The lender may file a lien on these. Read what you pledge and what you must report, such as inventory counts or financial statements, and how often. Missing a report can cause trouble even if payments are on time.

Learn how Farm Credit associations, banks and FSA operating loans handle lines differently, and compare. This farm money guide defines terms like borrowing base and covenant.

Check whether personal guarantees are required, and from whom. If a spouse, partner or family member signs, make sure they understand what that means. An attorney can explain.

Using a line wisely in a drought cycle

Dry spells test lines. Before drought hits, talk to your lender about your plan, including destocking triggers and feed purchases. Use data from the U.S. Drought Monitor and the National Weather Service to track conditions, and write down the points at which you will act.

Do not wait until a line is maxed out. Ranchers who talk early usually get more flexibility. Read beef cattle management resources for planning ideas.

Checklist and cautions

Before you rely on a line, confirm the term, rate, fees, review dates, covenants and collateral in writing. Verify program details with the state agriculture agency, since funding rules can change. This site is independent, does not lend, and is not affiliated with the program. Nothing here is financial advice.

Over at farm.FM, ranching economics stories and agribusiness reads cover cash flow, and a farm.FM story on operating lines is lighter. See also the Colorado Department of Agriculture.

Mark review dates on your calendar and prepare financial statements a month early.

Sources and further reading

• Farm Credit: cooperative agricultural lending network
• FSA Farm Loans: FSA direct, guaranteed, microloan and emergency loan information
• U.S. Drought Monitor: weekly drought maps
• National Weather Service: forecasts and warnings
• Colorado Department of Agriculture: state agriculture agency

Ask locally: Ask a loan officer to show a sample draw and repayment schedule for a line that fits your sale calendar.

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.