Playing Offense: Leveraging Equity Through Collateral

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For most farmers and ranchers, their wealth is in the land. And when the day comes that it’s all paid for, these producers have a decision to make.

“Usually they are starting to get in their 60s and things are paid off. You have the next generation inspired to come in. I’m just posing the question…so now what? You’ve never been financially stronger. You have the next generation inspired to come in. They have ideas and visions. Are you willing to use your equity now to support their visions now while we’re living or not? I didn’t say lose it. I said use it,” Alan Hojer, Director & Legacy Consultant with the Keep Farmers Farming program.

This equity could benefit all of your children, farming or not. It could be used as collateral to increase the capacity of the farming business, support and off-farm child’s quest to open a business, or build a home. Hojer believes leveraging equity through collateral is playing offense.

“If we are worried about leveraging it, again it gets back to what are you inspired by? Are you inspired by the visions of your children, the next generation, or are you inspired by the equity that we work so hard to pay for? You’re going to have to answer that question,” said Hojer.

The price of land is daunting and at times producers are paralyzed for fear of making the wrong decision. But by leveraging the equity of the first generation, the next gens are able to increase the capacity of the business to create cash flow while garnering an asset that appreciates in value. The new debt becomes theirs and provides opportunities for learning.

Legacy Consultants with the Keep Farmers Farming program can help ag producers consider the equity opportunities. Learn more about Keep Farmers Farming here.

Taken from a conversation with Pam Geppert of Dakota Farm Talk.