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Young farmers should keep balance sheet, credit report top of mind

By Joel Penhorwood and Kolt Buchenroth

Finances are on the mind of all producers, but even more so for those just getting started. At the recent Young Ag Professional’s Winter Leadership Experience, Jessica Draganic with Heartland Bank said credit awareness should be high on the priority list.

“We really promote people making sure they are aware of their credit score and their credit situation. A good balance sheet is the most important thing in our opinion, especially doing an end of year balance sheet where you’re looking from year-to-year on your operation or even your personal financial situation. It’s so important for any banker or lender that you’re working with,” Draganic said. “Making sure that you are aware of a business plan or what you want to do with your operation — what you see now in the current situation, in five years and 10 years — and how do you get to that point. Organizing your thoughts and writing down your goals is so important.”

Draganic advised focusing on three main business relationships when thinking about the future of the farm.

“An attorney that specializes in agriculture and understands your operation,” she said, noting their importance when it comes to succession planning, drawing up purchase orders to buy the farm next door, and much more. “Having a relationship with a good ag accountant is very important. Having a relationship with a banker that understands your operation that is able to be an advocate for you and be able to present your story to their bank and be able to have your back.”

Draganic reiterated that many of today’s farm decisions rely on the oft overlooked credit score, especially for the young farmer.

“Credit scores are the foundation and the first piece we look at. It’s something that’s measurable giving your financial history for a bank, especially with a new relationship. People want to know what their score is — they want to make sure they’ve had it pulled and they’re aware of what is showing up on their credit scores; 70% of everybody has mistakes.  So make sure if you do have those, that you’re working through those, correcting those, so then when you do have the opportunity to buy something that you can and you get your score up.”

She encourages young and beginning farmers to ask themselves questions and constantly revisit their tax situation, balance sheet updates, and budget plans among other items.

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