by Edward Coates, SVP & Agricultural Banking Manager at NBT Bank Vermont has a diverse agriculture market with significant dairy and produce farms as well as maple syrup producers. There is also a movement throughout the Northeast and much of the country toward more natural, organic and locally-produced foods. This trend means expansion opportunities for well-established agribusinesses as well as new opportunities for start-ups. At NBT Bank, we are seeing many agribusinesses developing new markets and products, including many of the smaller operations that are significantly important to the overall industry.
NBT Bank has had a department specializing in agricultural banking for over 80 years, and we’ve been lending to agribusinesses since our bank was formed 160 years ago. This has given us a unique perspective on the industry and what’s needed to finance agricultural operations. We also understand the constant challenges, including the recent drop in commodity prices and the pressures of costs that rarely, if ever, go down.
A few years ago, NBT Bank worked with a conventional 90-cow, family-owned dairy farm, providing the capital to help them convert to organic milk production. This happened at about the same time that the next generation of the family was entering the business. More recently, the owners wanted to diversify their farm business. They researched compatible enterprises, creating a business plan to expand the organic operation and market grass-fed beef to area restaurants, as well as directly to local families.
Their plan called for the construction of a new barn and additional fencing that would allow the beef enterprise to grow and keep the beef livestock separate from the dairy cattle. This project initially included a state grant in addition to financing from NBT Bank, but the state grant funds would not be available until well after the construction was scheduled to be completed. NBT was able to provide bridge financing until the state funds were released, which allowed the construction to be completed on time.
This story demonstrates the importance of planning and partnerships to any new agribusiness venture. It also highlights how forging relationships with businesses outside of agriculture can create new opportunities. We have seen local, regional and even national restaurants as well as grocery stores that have recognized the growing movement in customer preferences for locally-sourced food and have begun to partner with local farms and other agribusinesses.
Another creative venture in agribusiness financed by NBT Bank involved a real estate developer who purchased a vacant industrial property. The developer rebuilt the property into a business park focused specifically on attracting small business tenants involved in the “farm-to-table” movement. The tenants included business involved in food production, craft breweries and even a media company devoted to promoting food businesses.
Partnering with any start-up business comes with risks. That’s not unique to agribusiness, but it is something that’s important to consider when developing business plans and considering financial requirements.
For any business to take advantage of new trends in agribusiness, planning and discipline will be necessary right from the start—and not just financially. Every aspect of the business—from finding the right employees to marketing the product—must be well planned and executed. A customer-focused bank, like NBT, can help provide information on financing options and other financial services to support a business at any stage. A start-up may be focused on credit, while larger operations may benefit from cash management services. And, wealth management consultants can even help with succession planning for businesses that are ready to make that transition.
A good banker will also help customers make connections with organizations and programs that can provide support and resources. Examples include economic development grant and loan programs that may be available at the local, state or regional level. Of course, it’s important to remember that bankers aren’t business consultants. It’s always critical to consult with a financial or tax advisor when developing a business.
There are several different types of agricultural loans that can be used to support different aspects of agribusiness. This includes: real estate purchases and improvements; cattle and crop expenses; equipment acquisitions; and modernization. NBT Bank provides financing for all of these needs and has been designated a preferred lender by the USDA Farm Service Agency’s Farm Loan Program. While rates for agribusiness loans tend to be higher than other types of loans, the rate environment in general is good making it a favorable time to consider exploring various financing options.
As with any business, it’s important to have a business plan to guide the venture and support communications with bankers and other resources. A three to five-year plan with information on the business owner’s experience and financial information is recommended. Those interested in taking advantage of new agribusiness trends should update their plans to show how they might take advantage of strategies like marketing directly to consumers and selling to local and even regional businesses. NBT Bank offers an Agricultural Lending Application Checklist on our website nbtbank.com that can be a helpful starting point.
It’s important for farmers of any size to work with a banker that understands the industry and is able to provide a range of options and solutions. As we wrap up this year’s growing season, it’s a great time to begin planning for the next cycle, including reaching out to bankers and other resources that can offer support.
About NBT Bank
NBT Bank established a presence in New England with the opening of its Vermont Regional Headquarters in Burlington in 2009. Since then, the bank has expanded its presence in New England to include locations in four states—Vermont, Massachusetts, New Hampshire and Maine. Today, NBT Bank has approximately 100 employees and has loans and commitments of over $1 billion in New England. NBT Bank’s Agricultural Banking Department works with more than 600 different farm operations across the bank’s footprint, including dairy and other livestock farmers, field crop farmers, fruit and vegetable farmers and other agribusinesses. NBT Bank is a member of the Federal Deposit Insurance Corporation.