Preparing a Farm Business Plan for Lenders

• business plan
• lenders
• loans

How do lenders evaluate a farm?

Lenders commonly look at several things together: your character and track record, the farm's repayment capacity, your own capital in the business, collateral that secures the loan, and conditions such as markets, the economy and the loan's purpose.

No formula guarantees approval, and different lenders weigh these differently. Your plan should speak to all of them.

FSA loan officers follow program rules that other lenders do not, so ask what the agency requires for the specific program in your application.

What numbers do lenders want to see?

Expect to provide a current balance sheet, several years of tax returns, a projected income statement and a monthly cash flow. They will also want a list of debts and assets and details on the loan's purpose.

Be ready to explain how you arrived at your projected yields, prices and costs. Assumptions tied to your own history are more credible than optimistic ones.

Make sure the numbers agree across documents. Differences between your plan, your tax returns and your balance sheet raise questions and slow decisions. If a number is an estimate, label it as an estimate and explain where it came from.

• Balance sheet dated close to the application
• Recent tax returns
• Projected income and cash flow
• Debt and asset schedules
• Loan purpose and repayment source

How should you explain the loan request?

State how much you need, what it pays for, how you will repay it and how long you will need. Show how the purchase improves income or reduces cost, and include quotes or estimates for major items.

Be clear about which part of repayment comes from the new activity and which from existing income.

If you are buying land or equipment, include an appraisal or quote. If you are borrowing for operating costs, tie the request to your budget by enterprise.

How do you show you can handle a bad year?

Include a downside case with lower prices or yields and show how you would still meet obligations. Mention working capital, insurance, marketing contracts and other cushions.

Lenders know farming is risky. They respond well to farmers who have already thought about what could go wrong.

Ask your lender what repayment margin they like to see, since that differs by lender and by loan type.

What about experience and management?

Describe your background, years farming, training and the people who help you. Beginning farmers can emphasize apprenticeships, classes, mentors and off-farm work that shows reliability.

FSA and Farm Credit lenders both look at management ability, and they often work with beginning farmers who show a solid plan and willingness to learn.

A short letter of reference from a customer, a buyer or a mentor can help support your story, particularly if your own record is short. Include short notes on training, certifications or records of past performance that support your ability to manage the new loan.

How do you present the plan?

Keep it organized, short and honest. A cover page, a summary and clearly labeled sections with the financial pages at the back is a good order. Proofread the numbers so totals match across pages.

Ask the lender how they like to receive it and what they will need beyond the plan. Offer to meet in person and walk through it.

Bring a copy for yourself and be ready to answer questions without reading from the pages. Knowing your own numbers builds trust.

What mistakes should you avoid?

Avoid overly rosy projections, missing pages, numbers that do not tie to your tax returns and surprises about existing debts. Do not promise outcomes you cannot back up.

Also avoid pressure from anyone who guarantees approval for a fee. Legitimate lenders and USDA offices do not charge to take an application in that way, and the Farm Credit Administration and CFPB publish consumer guidance on borrowing.

If your application is denied, ask for the reasons in writing and ask what would change the answer. Many lenders and FSA offices will explain, and appeal rights may exist. Review your plan with a neutral reader, such as a mentor or extension educator, who can tell you where it is unclear before the lender does.

Last reviewed: November 12, 2026. Written by the Farm Money & Grants Editorial Team. Educational only, not tax, legal or financial advice. See our editorial policy.