How to Finance a Horse Business

Horses are expensive, whether you own an enormous equestrian facility or just a couple of “backyard ponies”. When you decide to start a horse business, however, finances should come to the top of your priorities because without the necessary capital, you won’t be able to get very far. To finance a horse business, you need to have a detailed money-management plan that allows for every contingency.

There are hundreds of different types of horse businesses, each of which is unique and requires different amenities. Therefore, your financial plans should be tailored to your individual idea, and you should separate in your mind the items you will need versus those you will simply want. For example, a horse stable where the owner provides boarding and riding lessons could have an indoor arena, but it isn’t a requirement.

Examine Your Current Finances

Before you can finance a horse business, you’ll need to know how much liquid capital is currently available to you. A $10 million retirement plan is definitely a substantial asset, but it doesn’t provide you with the cash you need to start your equestrian business. Liquid capital is the money that you can convert to cash at the drop of a hat, money that can be used to buy things now.

Furthermore, your start-up capital doesn’t include lines of credit and loans that might be available to you should you decide to pursue them. It is never a good idea to finance a horse business exclusively on borrowed dough because you have no guarantees of success. If the business takes three years to move out of the red, you’ll owe that money much sooner.

Prepare a Business Plan

The biggest mistake that I’ve seen horse business owners make is failing to understand that they are starting a business. It would be no different if you wanted to open a retail shop or start a web design service. A business requires significant planning and organization-two words with which “horse people” aren’t always familiar-so don’t underestimate the value of a business plan.

This document, which can be as long or as short as you would like, should at the minimum contain a list of the items you will need to start your horse business. This might include property, structures, horses, farm equipment, tack, utility deposits, insurance and a host of other items. Once you have this list, research the average prices for each and record them in your business plan.

Realize, however, that to finance a horse business, you will need to deal with unexpected expenses that crop up along the way. It doesn’t matter how prepared you are-it is nearly impossible to plan for every possible scenario. This means that you should have sufficient capital to cover not only expected costs, but also those that you didn’t foresee.

Estimate Your Financial Risk Tolerance

To finance a horse business, you will probably need to borrow at least a portion of the up-front capital required to get the operation on its feet. Very few people can manage to do this out-of-pocket, and even if you can, it’s important to leave some liquid capital free for personal emergencies. Don’t drop every last dime of your savings account into any fledgling business.

Personally, I have a very low financial risk tolerance, and I subscribe to Dave Ramsey’s debt-free lifestyle, and I will not start another horse business unless I can cover it 100 percent with my own money. However, I work with other horse business owners every day who bolster their own capital with 50 percent or even 75 percent borrowed money. It’s a personal decision you will have to make.

However, it is important that you understand your personal financial risk tolerance before you determine how you will finance a horse business. This gives you guidelines within which you will have to work, and sets boundaries for future decisions. The last thing you want is to accept a substantial loan from a bank, then decide that you don’t want to assume the risk.

Borrow the Money

If you’ve decided that you want to finance a horse business by taking out loans or lines of credit, you will need to find the best rates you possibly can and be smart about your financial decisions. Accepting a line of credit with a large interest rate will mean that your expenses increase significantly once your equestrian business is up and running. It will be that much longer before you generate a profit.

Generally speaking, it is less expensive to take out a loan rather than a line of credit, or (God forbid!) use credit cards that you already own. For one thing, the APR is usually lower on a loan, which means you pay less interest, and it is generally easier to negotiate the terms when you’re applying for a loan.

Talk to at least three different banks or credit unions before you decide where to take out a loan. Ask about things like pre-payment penalties, APRs, grace periods and other factors that will determine how and when the loan is paid back. If you have an excellent credit rating, it shouldn’t be difficult to obtain the terms you want.

Prepare for a Struggle

It is never easy to finance a horse business, and sometimes it is downright frustrating. However, it helps if you keep your end-goal in mind, and focus on what you will do with the money once you have it in your hands. Make sure that you devise a logical and reasonable method of ensuring your financial security so that you don’t find yourself in a jam down the road.

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