When Matt Falk, CFO of Homestead Family Farms in Kentucky, realized the growth plans for their farm were outgrowing their lender, he knew it was time to make a choice: change lenders or change their growth plans.
But changing an operating loan provider is never easy, especially when the land is primarily rented instead of owned. For Falk, that meant thinking outside the big bank lender box and, instead, working with a lender which based their operating loan on their ability to produce and sell a successful crop.
Timing is Everything
By Matt Falk, CFO, Homestead Family Farms
Matt Falk, Homestead Family Farms
We were a rapidly growing farming operation and didn't have a big real estate base to lend against. We were outgrowing the box in which big banks look at loan relationships. We rent more acres than we own, and at a certain point traditional banks won’t lend against that concept.
With traditional lenders, some of our operating loans didn’t get processed until early spring of the current planting season. For farms like us, that timing simply doesn’t work. With FarmOp Capital our operating loans match the growing season to ensure that we have the right amount of cash available at the right time.
For Homestead Family Farms, that was a key factor. With an operating loan secured in early fall, we were able to prepay for significantly more inputs, locking in better prices. Also, the comfort of knowing that we have product secured helps offset the uncertainty surrounding today’s input market.
We locked in our operating loan for the 2022 growing season by October of last year (2021). And now that we have gone through the transition to FarmOp Capital, I am certain we will have a 2023 operating loan pinned down by late this summer (2022). That is a solid six to eight months sooner than our previous financial lender.
A Lending Relationship Built on Understanding
There are a lot of variables that go into a lending relationship and you're making a mistake if you just focus on the interest rate. We don’t always buy the cheapest seed or the lowest cost fertilizer. Sometimes, you get what you pay for, and it shows in quality.
With FarmOp Capital, they lend based on a successful crop and they encourage a thoughtful, disciplined approach to crop insurance and hedging. That has helped our farming operation mature and become even more sustainable.
We are able to utilize our existing crop insurance and hedging partners, and FarmOp Capital does offer resources for any additional help that we may need.
Plus, they don’t have a million customers, so they know exactly who I am when I call.
I know that FarmOp is growing rapidly, but they aren’t so big that communication is difficult. I often talk to many of the FarmOp Capital staff at the home office and I am impressed that my calls are always answered and questions are always explored. Even if they don’t have an immediate answer, they strive to learn more and help me find a solution.
And better yet, they understand the challenges of farming and how that affects our pocketbook. Whether it be a turn in the markets, trade and exports, or weather, FarmOp Capital truly gets it.
I always say, our operating loan is the lifeblood of our farm, and we found a lender that takes that as seriously as we do. I have absolute confidence that FarmOp will be with us through thick and thin.
Matt Falk’s in-laws, the Reding family, own and operate Homestead Family Farms, located in central Kentucky, the heart of bourbon country. The Redings are 6th-generation farmers, who primarily raise corn for local bourbon distilleries.
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