Starting A Farm Without Debt: Buying Equipment First

One of the most heartbreaking things a farmer has to go through is purchasing necessary items for his/her farm.  Land and equipment prices are often into the hundreds of thousands of dollars.  By the time you buy even a small piece of land, minimal equipment, and a small herd/flock, you could be in debt a million dollars.

Farming, however, isn’t like other businesses–you don’t necessarily make back what you put in monetarily.

Out of curiosity the Farmer and I looked into a small (couple hundred acre) farm loan and what it would take to pay it off.  After we did the math we learned two key things:

First, we would have to have a great crop each and every year in order to have a chance of paying it off.  If there was ever one year when a natural disaster happened, we couldn’t make it and all our work would have been in vein.

The second thing we learned was that even if we had excellent yields on a consistent basis, the odds were we would never live long enough to pay off our loans.  It was highly likely one (or more) of our children would inherit our debt.

Now, don’t get me wrong, I’d love to think that one or more of my children will want to stay on the farm and finish paying it off.  But…what if they don’t?  What if the Farmer and I put our blood, sweat, and tears into a farm and upon our death our children just got rid of it.  In our eyes, that would mean we’d never own our farm.

These are sobering facts.  When you do the math, it becomes clear pretty quickly that taking a loan out to start a farm puts you in a position of being a slave to the payments–most likely for the rest of your life.

Sound depressing?  Maybe so–and that should be even more of a reason why if you want to start your own farm you should try to do everything you can to avoid debt.

Is that possible?  Yes it is.  But it’s going to take three things on your part.  You’re going to need to be willing to live frugally, work long hours most days of the year, and be patient.

If you are willing to do these three things, then your next step is to pick your plan. Living frugally and not taking out debt means you’re going to have to start somewhere instead of jumping head-on into everything.  Let’s look at the one that takes up the least amount of space, buying your equipment first.

Buying Equipment First

Before you ever buy your first piece of equipment, you’re going to need an overall plan for your farm.  What do you ultimately want to do with your farm?  If your dream is a large herd of cows, or you want to get into growing hay for other reasons, your first piece of equipment may be a swather, or a tractor and baler. After that, you can add other implements such as plows, harrows, etc.

Or maybe you want to grow potatoes.  You’ll need a whole different set of equipment.  Now you’re looking at harvesters, etc.

Make Money Off Your Equipment

It may seem counter intuitive to purchase equipment when you don’t have land to work, but I promise you that if you choose your first piece of equipment wisely, you will be able to make it work for you and earn it’s own income while you prepare for the next step.

Once you are able to buy your first piece of equipment, it may be tempting to buy what you find for a good price, what you think you will use the most, or just a good, essential tractor.  But I’d like to encourage you to think differently.  I’d like to encourage you to think to yourself, What can I make the most money off of using my equipment on another farm?

Here are some ways you can put your equipment to work and make it earn it’s keep:

  • Lease your equipment to another farmer
    • Even if you have a baler but not a tractor to operate it, chances are there’s a farmer near you who’s going to have his baler break right when he needs it.  He could wait to have it fixed or fix it himself while his hay on the ground is blowing away, or he could rent one.  It happens a lot.
    • A soil nutrition company rented one of our track-tractors to spread compost this year.  While we were waiting for a truck to pick it up and bring it home, the owner saw it setting there after one of his own tractors broke down, gave us a call and offered to rent it.  It was still home in time for us to use it, only it made us some money too.
  • Let other farmers hire you (with your equipment)
    • Last year one of our neighbors had his baler break in the middle of the night.  Had he waited until his own baler was fixed, the hay on the ground would have been bad and he would have gotten behind.  Instead, he hired the Farmer to come in and bale for a couple nights while he fixed his own. In two days his baler was fixed and he hadn’t lost any ground.
  • Equipment breaks and people get sick.  Mother nature doesn’t wait, and other farmers will always be looking for others to help them out.  Make yourself available.

You Will Still Have To Pay Out

There are still some finances you will have to be responsible for once you own your equipment.

  • Insurance
    • I highly encourage you to insure your equipment.  There are just too many things that can happen.
  • Fuel
    • Farm equipment uses a lot of fuel.  If you haven’t bought it before, prepare yourself now so the costs don’t overwhelm you later.
  • Payments
    • Hopefully you are purchasing your equipment in full.  In the case you are not, don’t forget that it will have payments.  Farm equipment payments can be thousands of dollars at a time.
  • Transportation
    • If you are working for another farmer, you’re going to have to get your tractor or other equipment to their fields.  Whether you haul it on a trailer or on a semi, you’re going to have to pay to get it there.
  • Maintenance & parts
    • One of our tractors needs new tires this year.  They are about $1500 for each front tire and $3500 for each rear tire.  If you did the math, you just realized we will pay $10,000 just for tires on one tractor this year.
  • Oil, filters, etc.
  • Business cards
    • I highly suggest getting a couple hundred business cards.  You can get them for cheap.  As you get your name out there, you’ll find yourself handing them out in conversations, and even sending a couple with your invoices when the time comes.  Hopefully your clients will share them if they are pleased with the job you did.

Possible Downfalls

Owning equipment, responsibly paying all the bills associated with it, and even making all the right decisions may not be enough to make a profit on your equipment each year.  There are some chances you’ll be taking.

  • Traumatic weather
    • Drought, flood, hurricane, tornado, fires, etc.
    • Traumatic weather can mean no crops.  No crops mean no work, and thus no income.
  • No one hires you
    • When you are just starting out, no one knows your name.  I highly suggest working for another farmer doing similar jobs as you will on your own farm one day.  This way you not only gain skill, but when you are ready to do custom work of your own, there will be at least one farmer who knows you’ve got the skills to help out.
    • Since custom work (with your own equipment) is often paid per job, not hourly, farmers are going to want to hire people who can get in, do a good job, and get out.  If they are hiring you, it’s because they don’t have time to do it themselves.  If you take up a lot of their time asking questions all the time, they probably won’t hire you again.
  • Breakdowns
    • Is there a piece of farm equipment that doesn’t break down or have problems on a regular basis?
    • To be a successful farmer, you’ll need to add mechanic and welder to your trades.  Expect them, and be prepared.
  • Working at the drop of a hat
    • Mother nature is hard to schedule.  You won’t be able to mark your calendar to work a certain job for a certain farmer on a certain set of days months in advance.  When mother nature is ready to plant, you’re going to need to get in and plant before the rains comes.
    • Other farmers will call you when their equipment breaks, which is unpredictable.  When their equipment is ready again, you’re job is often done no matter where you are in the process.  You’ll need to be flexible to start with short notice and be done with short notice.
  • Lending your equipment out
    • It happens: you’ve got something that everyone else wants.  You’ll need to know where to draw the line in lending your equipment out (possibly to family, friends, etc.), and leasing it out.  We’re all here to help each other out, but when you loan your equipment out to one person, be prepared for others to come asking.  Decide ahead of time how you will respond to various people when the situation does come up.
  • No one pays you
    • I would be lying if I told you it didn’t happen.  You will be working for farmers–not large corporations with steady income.  Diversify where you work, and thus where your income will come from.
    • In my opinion, it is better to wait for payment, than it is to start filing paperwork for payment.  Remember when a farmer can’t pay you that one day you may be in the same situation.
    • Don’t worry about what’s “fair.”  I understand this opinion may not be popular.
    • Don’t write off a debt, but do try to work out a barter if payment isn’t happening.  We have bartered for equipment, animals and other services when payments weren’t available.  Look for the good in the person you worked for and know that they understand you are worth the payment.  It does not mean you need to work for them again.
    • We have waited years for payments before.  Our family has gone without. But we have never needed the money so bad that we would pursue legal action and take a home away from another farmer who also has a family to feed.  When you choose to be a farmer, you realize we are all in this together.
  • Trying to decide when to stop buying equipment and start buying land.
    • The great conundrum.  There is always more equipment that can help you do more work (and eventually more work on your own land).
    • If you buy your land too early, then you’ll have to hire someone else with equipment to do part of your work.  If you just keep buying equipment, that’s more money out that isn’t going toward your land.
    • Take the time to plan out the finances.  Realize if you keep collecting a lot of equipment, it will be a long time before you get your land.  Realize also, that just because you get your land, doesn’t mean you should stop doing custom work for others in the beginning.

Tips When You’re Looking For Equipment

Start with what will make you the most money.  If possible, start with a tractor, combine, swather, or other piece that propels itself (as opposed to an implement that still needs a tractor to operate).

Prepare yourself mentally for the possibility that your first piece of equipment may not be a tractor.  A tractor by itself probably can’t make you much money. Although you could rent it out, if it doesn’t have an implement to go with it, this could be quite hard.

Get pieces that complement each other.  Did you get a wonderful combine as your first piece of equipment?  Perhaps the next logical step would be to get a tractor and baler.  Seems logical that if someone hires you to harvest their wheat, you might be able to move right along into baling their straw.  This results in one large paying job from one farmer.

If you choose a loader as your second piece of equipment, then you’ve got to line up separate harvesting and then stacking jobs, likely from different farmers. You’re doing twice the recruiting, twice the travel (in two different directions), twice the time management, and twice the billing.  There’s nothing wrong with this, but it will be much easier to have complementing equipment.

Not all tractors can do all tractor jobs.  Not all tractors are compatible with all implements.  Finding a really good deal on a well-maintained tractor and then finding an equally great deal on an excellent, low-hour baler may seem like the perfect fit, until you realize that tractor may not be able to work with that baler.

When it comes time to hire you, some farmers may want you to help them, but they may not want track tractors in their fields.  Pay attention to the type of wheels on your tractor and those in your area.

Realize you can sell it later.  Unless you get something that no longer has parts available, is to the point it can’t be fixed again, or is not in demand at all in your area, you’re going to have the opportunity to sell it.  You don’t have to buy the perfect equipment the first time around.

It’s always significantly cheaper to buy equipment from another farmer than it is a dealer.  However, a dealer will make sure the equipment is in working order, and may guarantee certain things.  They will be able to help you find similar models to look at.

You can expect when you buy equipment from a farmer you’re getting an as-is piece.  Also (at least in my area), I trust every farmer who is selling me equipment to tell me exactly what needs replaced, and what needs fixed.  I also trust they they are just people who don’t know everything.  You’ll have to weigh your options.

Want to start a farm without debt? It's possible, but you need a strategy. Here, read about how to start your farm with equipment first to stay out of debt.

Alternative Plans To Start Your Farm Without Debt

Perhaps starting with equipment without land makes you nervous, or perhaps you really can’t decipher what your first piece of equipment should be.

That’s okay.  There are two other possibilities for starting your farm without debt.  You can buy your animals first, or you can buy your land first.


1 Comment

  1. I am so pleased to find this article! I like all the info. You made my day with this great article. Thanks for sharing.

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