Client

New Age Grain

Founded

2016

Headquarters

Praire du Sac, WI

Background

New Age Grain and its related entities cultivate a substantial amount of farmland in Wisconsin.

The company provides a valuable advantage by offering local grain drying and storage capabilities. These storage capabilities allow them to harvest and store grain, which in turn enables them to sell the grain later in the year when pricing is typically higher than it is during harvest season.

To grow their business, New Age Grain planned to dramatically expand their grain warehousing and dealership. In order to do so, the company planned to install a new grain bin costing $1,350,000. A new grain bin would mean increased storage capabilities, and an increased supply of products to sell at a later date when the demand and pricing is high.

This grain bin expansion required financing to get the project underway. Initial funding was required to order the grain bins and related infrastructure, such as foundation work, scales, conveyors, load-in and load-out hoppers for the scalehouse. Additionally, there was a real estate component of the project expenditure for the land that the grain bin would stand on.

New Age Grain had begun the process of making this new grain bin a reality: they had found a bank, ordered the equipment, and construction began.

The team then hit a major roadblock. The bank commitment pulled out, leaving the project stalled. This bank also held a mortgage interest in the land where the grain bin was to be located and became a roadblock to the project’s progress.

How a Wisconsin farming company combined equipment agriculture leasing and real estate transactions to grow their business.

Relying on multiple funding parties and varying types of financing can create a challenge for a developing business. When done correctly, this leads to successful growth that takes the company to the next level as exemplified by New Age Grain.

Overview

New Age Grain farms a significant amount of acreage in Wisconsin. The company harvests and stores grain, and had intended to expand their storage capabilities with a new $1,350,000 grain bin.

Challenge

A grain bin is affixed to real estate, creating complications in financing the equipment. Additionally, New Age Grain’s original bank pulled out of helping finance the project.

Solution

AFN paid off the original bank’s commitment, then found a new bank to refinance the grain bin site’s real estate. Additionally, AFN structured a lease to finance the grain bin expansion.

Outcome

AFN brought a stalled project to life, and has since financed 4 additional phases of more construction around the same site. As a result, New Age Grain has progressed from $300K in revenue during this project in 2017 to $8.5MM in 2022 – with continued growth on the horizon.

AFN’s Agriculture Leasing Approach

The vendor installing the grain bin equipment contacted AFN to see if AFN could help restore the project’s progress.

AFN saw a project that had great potential and jumped in to act quickly.

There were different pieces of the puzzle that had to go together to achieve the desired result: a fully funded grain bin expansion. AFN assessed the situation and built a plan to satisfy all parties, including the previous bank that had a mortgage interest in the land.

AFN took a multi-step approach to get the expansion project on the right track again:

1. Paid off the previous bank

      • This action removed the roadblock and freed up New Age Grain to pursue a new partner.

2. Identified a new bank for New Age Grain to refinance the new grain bin site’s real estate

      • AFN found a qualified banking partner for New Age Grain to ensure they had the financial security to expand their business. This new bank also would be financing the debt aspect of the lease with AFN  for the initial phase of the grain bin expansion.

3. Structured a lease to finance 100% of the grain bin expansion cost

      • Taking an agriculture leasing approach to finance the grain bin expansion preserved New Age Grain’s working capital. New Age Grain needed to ensure working capital was available to expand their operation, purchase local farmers’ grain, and remarket it as a licensed grain dealer. A traditional loan would have required an additional $200,000 of cash downpayment that New Age wanted to preserve.

Between paying off the former bank, bringing in a new bank, and structuring a lease to position New Age Grain for growth, AFN reignited the grain bin project’s progress.

“The New Age Grain has proven to have a solid handle on their operation and a vision for their future. Each partner understands their role in the company. The leadership is already grooming the next generation long before they will take the reins. This has served them well and earned our confidence. They have also been willing to change when warranted and take counsel. I believe we have also earned their trust. Finally, they are just really solid people! This is the model customer relationship for us.”

Richard Homan, Owner & Vice President of AFN

How AFN Helped New Age Grain With an Agriculture Leasing Solution

AFN came to New Age Grain and built a customized agriculture leasing solution to facilitate the company getting the project fully financed and underway.

With the partnership that New Age Grain and AFN developed, the following was accomplished:

  • Rescued a stalled project
  • Speed of action and implementation
    • AFN was introduced to New Age Grain in April 2017. The initial transaction completed by AFN was closed by July 1, 2017. Overall, it took less than 90 days to complete a complicated series of real estate transactions and fully fund all vendor invoices.
    • Within 30 days of AFN’s start on the project, the vendor had sufficient comfort to continue construction on the project while AFN completed all underwriting, title work, documentation, and funding.
  • Minimal cash investment
    • The lease that AFN created and implemented allowed New Age Grain to establish their operation with minimal cash investment. The cash investment saved was provided by AFN as the Lessor and allowed New Age Grain to utilize that working capital to grow their operation while conserving cash.
  • Incremental profit increase
    • New Age Grain benefits from this project in that they are able to generate significantly more incremental profit than the cost of the lease over a 10-year term.
    • This incremental profit is created by three income streams made possible by the grain bin project:
      • Storing customer grain for a monthly charge
      • Drying customer grain for a charge
      • Storage of owned grain past time of harvest to be “carried” and sold at a time when market supply is lower and prices are higher
  • Improved financial reporting
    • AFN helped New Age Grain improve their financial reporting by establishing an accounting system for their warehoused grain.
    • Timely and accurate financial reporting has significantly enhanced the company’s new bank relationship – the relationship that AFN established for New Age Grain.

AFN's Agriculture Leasing Results

Between the actions and outcomes, this partnership has led to fantastic results and an ongoing relationship between AFN and New Age Grain. Since the initial project funding of the grain bin expansion in 2017, AFN has financed 4 additional phases of other construction at the bin site.

AFN and New Age Grain’s relationship had produced multiple positive impacts:

  1. Sustainable employment for those in the farming industry
    • 15 full-time equivalent employees/owners are employed by New Age related farming entities. The successful grain operation expansion enhances the long-term sustainability of their operation.
  2. Cost and service-oriented services for local farms
    • New Age Grain currently provides services to 66+ local farm operations, providing them a more cost-effective and service-oriented operation than were previously available before New Age began operations.
  3. Revenue and product growth
    • These ongoing expansions have poised New Age Grain for financial success: their revenue has increased from $300,000 in 2017 to $8.5MM in 2022, with expected continued growth in the future.
    • In terms of grain bushels, the added grain capacity from the expansions have expanded from 50K bushels in 2017 to 1MM bushels.
    • Projected gross revenue for Grain operation in 2023 is 12MM. Growth of gross revenue and bottom line profit will allow ownership to continue to expand their grain and farming operations and invest in their local communities.

Between positioning New Age Grain for major revenue increases, identifying a qualified bank to partner with, and enabling local farms to benefit from quality services, AFN is proud of the outcomes and results of this lucrative project.