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Join FBN®’s Sunday Mancini as she chats with Pepo Peschiera from FBN Finance about a new product called Farmland Capital in this insightful video.
What is Farmland Capital
How Farmland Capital was developed
How the product works for farmers
How to get started
[READ MORE: How Can Farmland Capital by FBN® Finance Help You Buy Land?]
For more information, please:
Visit our product page at fbn.com/capital
Email us at co-investments@farmersbusinessnetwork.com
Call us at 866-619-3080
Sunday Mancini 0:00
Hi, everyone, this is Sunday with Farmers Business Network®. And I'm here today to talk with Pepo Peschiera from FBN® Finance, about a new offering from FBN Finance called Farmland Capital.
Pepo, can you tell us a little bit more about Farmland Capital? What is it? What farmers need to know about it?
Pepo Peschiera 0:26 Well, thanks, Sunday.Farmland Capital is basically making capital available for farmers.It's a minority investment, or investing alongside farmers to help them own and control farmland in such a way where they can buy out FBN. This capital has no annual payments, no interest, no rent, no payments at all on an annual basis, it just shares in the changing value of the farm in the future.
Sunday Mancini 0:47 Awesome, so maybe some backstory will be helpful. How did this product come about?
Pepo Peschiera 0:53 Farmland is the most essential asset for any farmer. You need land to be a farmer, but it's also the most capital intensive one.
Pepo Peschiera 1:04 And in recent years, farmers are having a hard time competing with investors for land. We found in some recent surveys that we did at FBN that 37% of the farmers are looking to buy land within the next year, and 39% of the farmers are considering buying out a family member.
69% of farmers would like to reinvest in their farming business but without taking additional bank loans. So like in all these cases, the limiting factor for farmers to grow and to make a sustainable operation is access to capital loans that can only cover a part of that loan.
If bank loans typically go up to 65% of the farm value. And they come with annual payments that are a burden when farmers have borrowed things like weather and commodity prices that can change.
We created a product that gives farmers cash that they can use in their operations. We come in as a minority passive investor, we do not share in any of the annual payments, we don't charge any rent or any interest rates.
The farmer controls all the decisions on the farm, they get 100% of the income of the property. This purchase shares in the changing value of the farm in the future. If the farmer does well, this investment does well too.
But there's no interest rate or no no annual payment ever on this product.
Sunday Mancini 2:36 Can you give us some real world examples of how this product would work for farmers?
Pepo Peschiera 2:48 We have been recently working with a farmer with a $2 million farm, where he got a $1.2M dollars in debt on the property.
He was paying a lot of annual debt payments and that was having an impact on his cash flow and the income he had available. So what we did with him is we replaced a small portion of the debt with a $200,000 co-investment. And that allowed him to basically improve his financial metrics and then qualify for a loan where he went from 6% interest rates to 3% interest rates actually, less than 3%.
He was able to reduce his annual payments. His annual debt payments went from $115,000 a year to $55,000 a year. It's like a huge reduction and it's a lot of money that this farmer has now available to use and continue reinvesting in his farming operation.
We could find situations like this across the country. This is a product that we’re offering for farmers, farmers of like crop plants all over the US of different sizes, shapes, crop types, with a really quick underwriting process for these co-investments.
We can typically invest up to 25% of the farm value. We're always a minority shareholder so we never participate in more than 49% of the equity on the non-debt portion of the farm.
Sunday Mancini 4:20
I know you touched on some of the pain points that this will solve for farmers. But if a farmer wanted to get started and learn more, where should they begin?
Pepo Peschiera 4:33 There are a few different use cases that we have seen for farmers with this product. One of the main ones is that farms want to lower payments with this capital injection and they can improve their financial metrics and qualify for lower interest rates. We’ve also found a lot of interest from farms that want to expand their operations.
Pepo Peschiera 5:00 These are farmers that need a larger down payment to buy a piece of land and help them to expand and make a sustainable operation without increasing their annual debt payments. So those are some of the main use cases.
Pepo Peschiera 5:20 Another big one that we have seen, it's farmers that have some family succession or they need to buy some co-owners of the property, they need to come up with the funds to do that. So with this product in combination with a loan, it works really well.
Also farmers that are at the end of their farming career, they're getting near to retirement, they own farmland and they want to take some cash off that land to use for whatever they want. But they do not want to pay taxes when they sell that land. They do not want to sell the land and get rid of it either. Like they want to continue having control of that land.
And they don't want to take that because that comes along with interest payments and has an annual burden. Those are the main pain points that we are finding this product solves and that can really help farmers in those situations.
Sunday Mancini 6:09 Awesome. Thank you so much. So in order for farmers to learn more about this new offering, please visit www.fbn.com/capital or email co-investments@farmersbusinessnetwork.com to learn more.
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