Wondering about financing a herd expansion

[south_star]

Hello everyone,

You have all been so helpful in the past that I thought maybe I would ask your advice on this subject.

I am looking to expand my herd, I have the facilities and more than enough feed to accommodate more horses (hubby's a hay dealer) I am though lacking in the funds depatment, I was just wondering if any of you have ever taken a loan to expand your business, and if so... how did you go about it? any info. you could give me would be very helpful. Thanks everyone.

Linda

South Star Farm

 

[south_star]

I could really use some help as I don't know about this kind of stuff

 

[Miniv]

Linda,

Don't. And it will be very hard to get a regular loan for what you are intending, anyway.

If you do find a loan, it would be at a high interest rate. Then you need to look down the road at how you will be making your payments AND if any of the horses get sick - such as colic or has a distotia, then your expenses would be compounded.

My personal recommendation would be to build your herd slowly as you can afford it. Shop around for just the right horse for your program, and if it's expensive, work out a payment plan with the seller for that ONE horse. And if your budget allows, look at purchasing a second horse the same way.....

But as you purchase each animal, please also budget for the possibility that they will be needing extra vet care. (A colic surgery can cost between $3000 to $5000 and a distotia can cost up to $1000.)

There is an old horseman's saying -- If you want to make a small fortune with horses, start with a large fortune.....

MA

 

[Chandler@RoyalPalm]

Well, If a loan is an option for you. I wouldn't mind performing a financial analysis on your real estate portfolio. You could refinance/cash out and pull equity out of your home and lock in at a low rate, to use the funds for your horses endeavor.

Chandler Marks - Washington Mutual Home Loans- Sales Associate

 

[Whitestar]

I have to agree with Maryann. If you talk to many of the people that do manage to make some money in raising miniatures, it is because they either have prior experience in raising animals, or they are darn good with figures & budget. I personally used credit cards at 0 interest rate, afterall the bank was not too happy lending $15,000 to buy a stallion, frankly, I also had 80,000 in debt on my herd but had excellent credit before during & after miniatures which is very important to me. I was successful in raising miniatures in the time that I did it, but I was never rich, I did all the work myself, including hand breeding 40+ mares a year, standing 7 stallions at stud, foaling out mine & others foals, cleaning our four barns every day, building our own barns, boarding horses, buying & selling horses, making & selling carts & other items on the side, & being very very active in both promoting my own horses, & the breed itself by being a founding member & very very very active in a miniature horse club that I & another breeder started which took off to become a very successful club with a great area show. We lived & breathed miniature horses as the most successful owners will do. It is a very good idea to start off with a few good mares, see if you can even break even after waiting for 11 months for that special foal, that may or may not come easily, turn out quality & that you may be able to market. Then you take the profit from those foals & buy more mares if that is what you really want to do. But take into consideration that things dont always go well when you own animals, & you must have an emergency fund set up to cover. I can tell you what not to do, dont buy bred mares thinking you will sell the foal to pay it back, dont pay a lot of money for a show horse unless you are willing to either have the funds to have it shown by a trainer, or that you have what it takes ( and it takes a lot, both money & time & effort) to keep a horse in show shape & to show the horse. And dont let people fool you into thinking that you can become rich in miniature horses, if you look at the most successful large farms, most of them had businesses that allowed them to buy the big farms, big name horses & keep the trainers & show ring that you see advertised before they got into miniatures. There are some farms out there that are simple hard working people that do probably manage to make a living off their quality horses but I can promise you again, it is a 24/7 life for them, one I am sure that they wouldnt trade for anything if you asked. I never though I would, but it wasnt really my choice at the time, however it turned out to be a blessing for our family.

 

[Sanny]

WHITESTAR......what an excellent detailed post with very good points.

I agree with the basic point - DON'T go into debt to buy horses thinking you will earn the money back PLUS make a profit and those out there that are actually making money that are raising and showing horses generally have many irons in the fire and a good business head and sense and are finding other ways related to horses somehow to make money and for the most part there is money coming from elsewhere that is funding the horse "hobby".

An option for you might be going into partnership with someone on a few horses or do some sort of lease agreement with someone that needs to downsize and isn't quite ready to sell...I'd recommend getting everything in writing though, and carrying insurance on the horses in case of death or major illness or surgery.

 

[Marty]

I would never in a million years take a bank loan out to buy a horse or in your case to establish a herd. Not a chance.

I move rather slowly in the decision making department and I have to look at one at a time and not get in a rush.

There are way too many good horses out there for sale by good people that are willing to go the extra mile to help you make reasonable payments and that's the way I would go.

I'm the budget queen and if there's a horse around here that I really want, I will get it if payments can be worked out.

You may have land and your hubby may be in hay, but there's still the unexpected vet bills that can kill you and put you behind the 8 ball really quick.

Please take MaryAnn's advice.

 

[Becky]

Agree with the others - don't take out bank loans to buy horses!! I've known of more than one that have lost their shirts (or more!) by doing that. However, there are many sellers that would be more than happy to finance your purchase!

 

[Laura]

Linda, There are many sellers like myself who will happily sell a horse/horses on time payments. I have some pretty set standards that have worked very, very well for my Buyers and also protect us as Sellers.

 

[Cathy_H]

I have seen several people go into debt to buy themselves a herd of horses. After not being able to make a profit they sold the horses at a loss & still owed the bank. Some even divorced their spouses.......................... That was back when the average breeder could get decent money for a decent horse. In todays market for an already established breeder there still may be a profit, but for someone that has to start from scratch you best have a pile of money to start with.

 

[SHANA]

I agree do not take out a loan. I have been lucky with my herd. My first mini I rescued in 2003, only paid $250 for him. He is amazing, such a nice gelding. Then in 2004 I traded a arabian filly for a 1992 mini mare in foal. Then I bought on terms a stallion in early 2005. Then later I found a nice 2005 filly that I bought on terms, then a mare in foal for 2006 I could afford, also on terms. Then I traded a arabian mare for 2 mini mares in foal and a shetland mare in foal(foal of shetland retained by breeder) and am paying on terms a 2005 mini filly sired by Lucky Four Haligonian. So now my mini heard numbers 8(1 stallion, 1 gelding, 4 mares in foal and 2 2005 fillies). The 4 mares and 2 fillies are not related to my stallion and 3 of the mares are in foal to outside stallions so if they have fillies I will keep them to add to my herd. My 1992 mare lost her 2005 foal due to being malpositioned and she is in foal to my stallion for 2006. I am anxious to see what they produce.

 

[Jill]

I agree with those saying not to take a loan out, including drawing equity out of your real estate -- no no no. I bet that if you took all the mini horse breeders, there would be maybe 1% who have any kind of meaningful monetary profit from their horses. And a big percentage of owners / breeders where it is a MONEY OUT situation, and that includes me! But it's a hobby, so I expect it to be a money out kind of deal.

Just increase your herd selectively when you can. Many breeders / sellers will allow you to make short term payments and that can help because then you don't have to spend all your horse money at once.

Good luck!

 

[kaykay]

im more in the middle here. i have not taken out any bank loans to pay for horses but know many people who have. I did however sell a really hot mustang to purchase my first horses and get started. Also i think there is a bit of a misconception that only rich people can afford to have an excellant herd or make money in horses. I know the eberts took out a loan to buy buckeroo and their bank thought that amount of money was crazy for a horse. They also tried to take out a loan for their awesome barn they built but the bank wouldnt finance it so they did it slowly over a few years paying for it with money from foals sold.

I think the reason it worked for the Eberts (and maybe they could come post

) is because they had a vision and total and absolute faith in the horse they bought. And they never wavered from that or lost faith along the way.

You would be hard pressed to find any new businesses started without a bank loan. So if you are treating your horses as a business i dont think there is anything wrong with getting a start up loan. You just have to be very smart about how you use the money, what horses you buy and be sure you have a great business plan. Years ago i owned my own store and used cash on hand to start it and never got a loan. Another local business man told me i was crazy. He said that 80 percent of all small businesses close within one year due to a shortage of available cash. I do believe now he was right. I ended up closing my store after one year because of a shortage of cash. Looking back i should have gotten a small business loan and done it right. I was only half way in and you just cant run a business half way in.

I will also say the horse business is a bit different as you are dealing with live animals. I would say a big majority of new farms sell out due to vet bills. So even more then an ordinary business you have to really llive, eat and breath horses to stay in the horse business. I have found the majority of successful business people are succesful because they are so passionate about what they do be it horses or selling houses.

 

[kaykay]

dang dble post

 

[Lisa-Ruff N Tuff Minis]

I have to agree with Kay in a way. I say go slowly and build your herd one horse at a time but.. getting a horse in payments is still financing them in a way.

To many people get into this and think they are going to make money and yes some do.. but not with your avg or below avg breeding stock. It takes alot of time ,money and faith and knowledge or hard lessons along the way.

So i say yes try to get the absolute best you can afford to many get 2 or 3 casue they are a deal and not the one top quality they can find. Take out a 2nd on the house well NO.. but find a seller who will work with you on payments to get you that special horse one horse at a time .. YEP

 

[Frankie]

Just another thought.

I do agree with most already said.

But prices of horses are still going down, not all, but overall.

If you finance, you are actually paying more for a horse, finance charges and can you ever recover that?

 

[kaykay]

good point frankie and there are a couple ways to look at that. Your way is saying the market is down so if i finance horses they wont be worth what i paid for them. But thats only true if the market continues to go down. So if the market stableizes your still ahead and if the market goes up you are way ahead.

Buy now while the market is down (your getting more for your money) then when the market comes back up (i am positive it will and is now) you are pretty much set.

The thing is (or at least i think) you cant be in for the short run. You have to be in for the long haul. If you are deeply committed and have a good 5 year plan of where you are going then there has never been a better time to buy.

Also there are all the tax incentives to consider. This is a big thing if you are running your farm as a business.

but i want to clarify that i would never take out a second mortgage on my house to buy horses. I would consider someday taking out a business loan to expand or build another barn etc.

 

[lyn_j]

[SIZE=14pt]I dont see that the market is down for all horses. I have paid lots recently for a couple of really good horses. I have had offers to buy these horses for more than I paid for them. Doc Taylors sale is an example of the market improving for them every year and people standing in line to buy foals out of similar stock is an indication to me that the RIGHT hoorses will bring the right price. For example. A yearling filly purchased at the May Taylor sale for 2500 sold at nationals 5 months later for 6000. That isnt a down turn that is 250% profit. I think that AVERAGE to below average horses prices are down because there is an overabundance of them. I think that top quality horses will still bring top dollar. PRotecting your investment is important . Another example. When I sold Steel back to Dr Taylor I retained stud rights to him. Why is that important??? Because Doc NEVER breeds to outside mares, thus making my mares bred to Steel and my Steel foals more valuable.[/SIZE]

If you invest in the best you have less chance of dropping out later.

Lyn

 

[horsehug]

KayKay,

I tend to see things the way you do.

Mostly I think that when you are passionate about something and sink your heart and soul into it, you will succeed.

Seventeen years ago, my mom, a very smart woman, who was always interested in watching and reading about what made some businesses successful and others not, always told me it was the ones that loved what they were doing and really believed in it, that succeeded. So she gave me a small amount of what she called "venture capital" to get started and I bought my first few horses and fencing etc. with it. She had watched me from the time I was born almost, want to be able to have horses and raise them. So she knew I was not going to give up. And growing up in a big city I had never really had that opportunity until moving to the country about two years before I got my first minis and started my business. So she was happy to help me Finally get started on my dream!

Other than that first year, I have almost always about broke even or made a profit, and have reached more and more of my goals. But then, I live and breathe these little horses! And I do not even show except very minimally and close to home. But I Do raise the kind of minis that I love, and have found a market for. I love the reading and researching and planning breedings, and foaling and raising the babies each year, and day to day work with the horses, mucking stalls and cleaning pens, updating my own website on a daily or weekly basis, and meeting new friends with my sales.

I would never borrow against my house either, but I wouldn't totally rule out ever taking out a small loan if it was something that I knew was intergral to my horse business future.

Susan O.

 

[Tony]

I have read with great interest the posts in this thread and see lots of knowledge among them. I am considered a "big breeder" by most, but I feel like a small breeder because the horses are my obsession. I have never borrowed money to buy horses, but I have bought many horses on payment plans and continue to help others by doing the same. I have worked at the horses and reinvested almost everything that I have made with them back in them, and continue to do so. When people ask me, "Why would you buy another horse when you have so many?", I respond that the business has been so good to me that I feel an obligation to reinvest in the business because I believe in it. I brought home three new horses from the World Show, in fact! LOL. If I have the money available, I won't let a really good horse sell for an unrealistically low price, and would encourage other breeders to do the same.

I would advise you to buy the best that you can afford and if you love them and the business enough and work hard enough, you will be successful. The best thing that you can do is to find a breeder who believes in you and who you trust to mentor you and help you to your goals.