Land, Succession and Legal

Colorado Livestock Loans: Financing Herd Purchase, Feed, and Growth

Cattle are an asset, an income source and a risk, all at once. This guide covers how livestock loans work in Colorado and how to match the loan to what you are buying.

What is a livestock loan?

A livestock loan is credit used to buy animals, feed them or grow a herd, often secured by the animals themselves or other assets. Lenders include community banks, credit unions, Farm Credit associations and, for some borrowers, FSA programs.

Terms vary widely. Breeding stock may fit a multi-year loan, while feeder cattle and feed generally call for shorter credit tied to when the animals sell. Always check current terms with the lender.

Credit unions and community banks in Colorado also finance livestock, and many have long ties with local ranchers. Federal choices exist as well, so it is worth asking around instead of defaulting to the first lender you try.

Buying a herd

Purchasing cows or heifers is a long-term bet. The animals take time to produce calves, and returns depend on conception, weather, grass and the market. Lenders will want to see a plan that shows how the herd will pay its way.

As an example only, a rancher thinking of adding a set of bred heifers should project calf income conservatively, include vet and feed costs, and plan for a year with lower prices. If the plan works only when everything goes right, rethink it. CSU Extension has Colorado-specific information on herd management.

Heifer retention is one version of this decision. Keeping heifers back instead of selling them reduces this year's income in exchange for a bigger herd later, which can strain cash flow. If you finance retention, make sure your budget covers the gap and talk through it with your lender before the sale-barn season.

Financing feed

Feed is the biggest recurring cost for many herds, and a dry year can double the problem. Operating lines of credit are designed for that kind of cost, since they can be drawn and repaid as the year moves. A feed purchase financed with a long-term loan can leave you paying for hay that is long gone.

Think about contracting hay early, keeping a feed reserve and watching drought outlooks from Drought.gov. The beef cattle feeding guide covers nutrition planning that can help control costs.

How lenders look at livestock collateral

Animals are collateral that eats, moves and can get sick. Lenders may ask for inventory lists, brand or ear tag records, insurance information and periodic updates. Some do site visits. Keep records you can hand over without scrambling.

Be careful when selling financed cattle. A lender with a security interest in the herd generally must be considered, and selling without permission can create serious trouble. Ask about the lender's rules early.

Insurance plays a part as well. Ask your agent about livestock coverage, since some lenders want proof of it and some losses are not covered under standard farm policies. Check with the USDA APHIS pages on animal health requirements for moving cattle, which can affect your plans if you buy from out of state.

• Accurate herd inventory with dates
• Brand and registration paperwork
• Vet records and health programs
• Insurance coverage details
• A plan for how sales proceeds are handled

Growth without overextending

Expansion feels good when prices are strong and painful when they fall. Test your plan against a drop in prices or a dry summer and see if the loan payment still works. A smaller, steady step often beats a big leap.

The Kansas City Fed's agricultural credit surveys give a regional view of farm credit conditions and are worth a look. For general farm finance, see the farm money guide.

If you are tempted to expand because a neighbor did well, slow down and check your own numbers. Their land, debt and costs are not yours. A decision made on someone else's results can leave you with a loan that does not fit.

Getting ready to ask

Bring tax returns, a balance sheet, herd records and your plan. Ask at least two lenders for written terms and compare total cost. The Colorado Department of Agriculture lists state resources, and a licensed accountant can review the numbers.

This site is an education resource, not a lender, and none of this is financial, legal or tax advice. For a lighter angle, farm.FM runs ranch stories and farm jokes, plus a farm.FM story on buying cattle.

Sources and further reading

• Farm Credit: cooperative agricultural lending network
• FSA Farm Loans: FSA direct, guaranteed, microloan and emergency loan information
• CSU Extension: Colorado State extension
• Drought.gov: national drought information
• Kansas City Fed Agriculture: farm credit and land value surveys
• Colorado Department of Agriculture: state agriculture agency

Ask locally: Ask your lender and CSU Extension in Weld County or your home county to look over your herd budget before you borrow.

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.