How Much Income Do You Need to Have to Qualify for Refinancing?

Travis Carlstrom

Jan 16, 2025

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Refinancing your farmland loans or equipment loans can help you to: 

  • Optimize cash flow and working capital

  • Consolidate your debt into a single payment with a lower interest rate 

  • Lower your monthly payments or potentially qualify for flexible payment options 

  • Expand or improve your ag operation 

How Much Income Do You Need to Have to Qualify for Refinancing? 

You do not need to have a specific, set amount of income to qualify for refinancing. The amount of income needed is not as important as how your level of income compares to your financial obligations.

All lenders rely on some type of cash flow ratio that compares income, or how much cash you have available, to your obligations. This ratio is the key factor in determining whether or not you have sufficient income to refinance.

Below, we’ll walk through the process of calculating your income, your obligations, and your likelihood of qualifying for refinancing.


[Learn more about staying on top of your farm’s finances and maintaining your operation's financial wellness with our free financial templates and guides.]


How to Calculate Your Income

First, let’s define “income.” Income can refer to either gross revenue (how much money you made) or to the net income (gross revenue minus expenses). However, neither of these figures accurately describes how much cash is available for you to make payments. 

Use the formula below to assess the amount of “income” you have available to make payments with:

Gross Farm Income + Non-Farm Income - Gross Farm Expenses - Living Expenses + Depreciation + Interest = “Income” “Cash Available”

Let’s better understand that formula by breaking it down into four steps below:

1. Factor in ALL income sources, including: 

  • Farm income 

  • Income from non-farm sources, such as wage income, investment income, etc.

2. Subtract ALL expenses, including: 

  • Crop and overall operational expenses

  • Administrative/overhead expenses, such as taxes, utilities, professional services, and other miscellaneous costs TIP: An easy way to check that you are capturing everything is to use your Schedule F from tax return records. 

  • Living expenses

At this point, you’ll have a solid understanding of the amount of cash available to make payments.

3. Add back any depreciation and interest expense listed on tax return records, as most lenders will include these figures.  

  • Depreciation: Because funds did not physically leave your operation, depreciation is considered a non-cash expense and can be added back to your cash available or “income.” 

  • Interest Expense: Since a portion of your farm expenses will likely include interest expense paid, you can add this amount back to “Cash Available” as this amount will also be a part of your obligations.

4. Run your calculations from steps 1, 2, and 3 above to see your final income or cash available total. It will look like this: 

Gross Farm Income (Step 1) 

+ Non-Farm Income (Step 1) 

- Gross Farm Expenses (Step 2) 

- Living Expenses (Step 2) 

+ Depreciation (Step 3) 

+ Interest (Step 3) 

= “Income” or “Cash Available” 

How to Calculate Your Total Obligations

Compile a list of ALL of your loan payments, including personal obligations such as home mortgages, auto loans, and student loans. Annualize all payments so that you can compare your total annual income to total annual payments.

How to Calculate Loan Qualification 

To determine a final total, take the income total number you calculated earlier and divide it by your total annual obligations calculation determined above.

Loan qualification will require a ratio of anywhere between 1.0 to 1.50. However, the vast majority of loan programs will use 1.25 as a guideline. One way to think about this ratio is that for every dollar in payments, you have $1.25 to pay it with.  

Using Historical vs. Projected Figures 

The exercise described above can be completed on a historical basis using actual figures, as well as on a projected basis using estimated figures for the upcoming year. Lenders will look at both, given that each is useful in calculations for different reasons. 

Historical figures are important because they: 

  • Indicate the actual income your ag operation can generate 

  • Assess whether your projected figures are actually realistic

Projected figures are important because they: 

  • Account for the most recent changes to your ag operation 

  • Offer the lender an indication of what to expect going forward

Financial Solutions from FBN® Finance

With an average of 15+ years’ experience each in ag finance, FBN loan advisors are ready to talk to you regarding any questions you may have related to your farm finances, potential financial solutions, or other financial strategies for your operation. They are deeply knowledgeable about farmland loans, farm equipment loans, operating lines, and other customized financial solutions that may be a fit for your farm. 

Complete the brief form below or call 866-619-3080 to speak to a member of our FBN Finance team today.


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Copyright © 2014 - 2025 Farmer's Business Network, Inc. The sprout logo, “Farmers Business Network”, “FBN” are trademarks, registered trademarks or service marks of Farmer's Business Network, Inc.

Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify. NMLS ID: 1631119.

The material provided is for information purposes only. It is not intended to be a substitute for specific professional advice. Neither Farmer’s Business Network nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed. 

Travis Carlstrom

Jan 16, 2025

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