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Frequent Reader

Pulling a Loan at 17

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Hi,

I am a member over on the FFF boards, but I thought I ought to get adult insights into this subject as well. As a young person, I know that there is the USDA  Youth Loan to 4-H member (which I am) for livestock, crop, and related agricultural products. However, although low interest, its max. is $5,000. My main aim is to buy cattle. I have two options. Buy as many as I can this spring, and add that calf crop to my current funds. Or, save up from summer work (about another $5K) and from the sale of 2010's calf crop and cull cows (close to $10K more). We are looking to ship out the yearling calves this March, and the culls will likely ride along. At that point, it would still be plausible to purchase late spring/early summer calving short term cows. I currently have allocated $5,000 for the purchase of cattle of my current funds. Now, having never had a loan before, my questions are as follows. Is the bank interested in my actual cash worth? My parents have banked there for over 20 years, and now I have been banking there ever since I opened my first savings account. The bank folks know our family well, and my parents have an excellent credit record, but I have none. Also, is it wise to take the $5,000 I can get from the USDA and throw it in with whatever other loans I can get together? Parents and grandparents as loaners are both out. My folks are strapped for cash as it is. Now, in terms of the bank wanting to know their pay back, I think I have a thorough objective. If I can scrape together $15K in my own cash, plus the $5K USDA loan, that is $20K. Short term breds are at anywhere from $760 to $830 a head. There's 25 head at $800. Pasture rent averages $20/head/month. Over 8 months of calving and weaning, that's $4,000. I'll make that month by month at my job. Say I get a bad year and return only 20 calves, and they're light. 550 pounds. At $1.30 they'll return $700 and dang near pay for the cow. On top of that, open cows and the ones in bad shape get sold off to make up the difference. I'm looking, however, to try to get 50 head bought, and that of course doubles my pasture rent beyond my means. However, many of the older cows though can be kept for two calves, which is where the profit comes in. So, here's the layout.

50 cows -         $40,000

Rent -                  $8,000

Feed/drugs -      $1,000 (guesstimate)

My funds -        $15,000

Amount needed - $34,000

USDA Max Loan - $5,000

Bank Loan -           $29,000

Is it even worth trying to get my bank to get me a $30,000 note at 17? I wouldn't be working on loans except the cow market in great and the next couple years offer growth that I may not get the chance to grow like this ever again. Through college the short terms will get sold off and replaced by good quality young cows, thus building the herd. Thoughts? Thanks.

Cade Christensen

MYT Farms

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Advisor

Re: Pulling a Loan at 17

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In general, it is not possible for a person under eighteen to enter into a contract (and a loan is a contract) as far as I know.  A quick call to your family attorney would answer if that is the case for you where you live. 

You are abviously a dedicated and determined young farmer/rancher.  If you have to wait a few more months to make it happen, a good business plan today will be just as good in the future. 

Good luck, and keep moving forward!

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Frequent Reader

Re: Pulling a Loan at 17

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Off course, it also makes sense to see how much in low interest loans I can get a hold of, and go from there to determine my cow numbers, versus getting a number stuck in my head and trying to pay for that many.

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Advisor

Re: Pulling a Loan at 17

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In general, it is not possible for a person under eighteen to enter into a contract (and a loan is a contract) as far as I know.  A quick call to your family attorney would answer if that is the case for you where you live. 

You are abviously a dedicated and determined young farmer/rancher.  If you have to wait a few more months to make it happen, a good business plan today will be just as good in the future. 

Good luck, and keep moving forward!

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Frequent Reader

Re: Pulling a Loan at 17

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Ok, that makes sense. I really would rather take the full responsibility of the loan since I prefer not to leave my parents to foot the bill if something goes wrong. Well, I will really work hard for that $5000 USDA Loan, and work with 20 or 25 head this spring and start off a little bit slower. Thanks!

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Advisor

Re: Pulling a Loan at 17

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One other point...I emphasize: Ask an attorney where you live and farm about loan/contract laws there. 

Never accept advice from the Internet - however well -intended - as gospel.  An answer that applies in one place may be totally wrong in another, and we are from all over here. 

A simple phone call to your family's attorney would give you the empirical word where you live. 

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Senior Contributor

Re: Pulling a Loan at 17

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Let me add to Kay's advice on using professionals for help when appropriate.  Advice from a lawyer or CPA can often be obtained for a couple of hundred dollars or less.  That can seem expensive but it can be awfully cheap.

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Advisor

Re: Pulling a Loan at 17

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   When in doubt--check it out.  I call my CPA and lawyer a couple times a year and never receive a bill.  A few months ago I spent an hour with the lawyer for advice and was not charged.  Use your parents professionals as they will then have a better understanding of the whole situation.

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Frequent Contributor

Re: Pulling a Loan at 17

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Kay it is possible. The youth loan from the USDA works in conjunction with FSA. The whole point is to allow those that are under the age of 18 that cant get a loan from somewhere else, obtain a loan. Ages are 15 through 17. I received this loan when i was 16 and bought 6 heifers. Its a really nice loan, very low interest rates and a 5 year payback, though i payed mine back in 3.

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Senior Contributor

Re: Pulling a Loan at 17

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"  When in doubt--check it out. I call my CPA and lawyer a couple times a year and never receive a bill. A few months ago I spent an hour with the lawyer for advice and was not charged. Use your parents professionals as they will then have a better understanding of the whole situation."

 

Let me say more bluntly to not call a professional based on the idea that the advice may be free.  In my experience, it very seldom is.   Be willing and able to pay up front.   What I am saying is that if you start deciding not to call because the pro may charge, you are deciidng not to seek advice perhaps when you need it most.  It's only a hundred buck or maybe two at the most and in every case one can and should ask up front what the charges will be.  They'll give you an estimate or you can go elsewhere.

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Senior Contributor

Re: Pulling a Loan at 17

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Interesting, never getting charged for taking up a lawyer/CPA's time.  Never happens here and a lot of other places.

 

Anyway, it's still good advice to consult a professional.

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