How Are Farmers Using Fractal Capital? 

In our recent online roundtable, three farmer panelists shared their experience with Fractal and how they’re using equity capital in their operation. 

These farmers span the Midwest and work closely with Fractal partners Ag View Solutions, Maverick Ag and Uncommon Farms. 

• Ben Blair, CFO of Maxwell United, Central Iowa
• Rich Bronec, Owner/Operator of Bronec Grain and Cattle, Central Montana 
• Ryan Drozd, Owner/Operator of Drozd Family Grain, Southwest Michigan

Here are their key takeaways:

1. Fractal capital can accelerate growth by reducing trade-offs.

Fractal helps farmers overcome the traditional trade-off between having good opportunities and having the down-payment and cashflow to finance them. Each farmer noted how they didn’t have to pass on growth opportunities because they could tap into their equity in a cash-efficient way. Particularly when debt financing becomes restrictive, farmers don’t have to choose between maintaining current operations and pursuing growth – they can achieve both simultaneously. 

“We had just done a land investment and tied up some capital… the Fractal investment allowed me to keep on my roadmap with a tiling project, so I could generate that financial return earlier. The contribution margin that comes from that investment far outstrips the cost of that capital.” – Ben Blair

2. Fractal stretches your equity further.

Because Fractal is cash-cheaper than debt, Fractal allows you to tap into more of your equity for the same amount of debt service as traditional debt financing. On average, Fractal’s annual payments are 2-3% less than a traditional debt service payment from the bank. For the same amount of capital, a farmer could pay 40% less in ongoing payments with Fractal capital –   enabling you to cashflow more and bigger deals, with inherently less risk.

“While Fractal’s capital may cost more than traditional debt, it allows me to stretch my equity further. With the same down payment and cash flow, I can access 1.5 times more acres compared to traditional financing.” – Rich Bronec 

3. Fractal shares risk with the farmer.

Unlike debt, Fractal’s payments are pegged as a fixed percentage to the value of the land. In other words, payments fluctuate with annual appreciation and depreciation. If land values continue to fall, Fractal’s annual payments will decrease as well.

“If you think land values are high today, Fractal is kind of a risk hedge… they share in the downside if land values drop.” – Rich Bronec

4. Getting pre-approved gives you a competitive edge.

Each of these farmers emphasized the importance of building relationships with capital providers before you need the money. Too often, land deals come up when least expected, and having pre-approval allows you to “pull the trigger” without adding financial risk or burdening your cashflow. More importantly, you can position yourself to grow even in a downturn when equity cashflows less debt.

“Being ready for those deals is really important to us. We can move pretty quickly once we have the relationship and we know the market. That’s why we like folks to get moving ahead of time. This is a new way of looking at your business, and we want folks to be able to think about it, so when those really big opportunities hit, you can actually pull the trigger in a way that you manage risk and feel darn good about it.”  – Ben Gordon, Fractal CEO

5. Fractal capital positions you for growth in this downturn.

Fractal capital isn’t capital of last resort. It’s for farmers who are planning for the future, who are strategic about expanding, improving profits, and running a strong operation for years to come. If you’re thinking ahead, building a good team, and making smart financial decisions, Fractal can help you create a farm that lasts for generations.

“If you’re thinking about your future in ag, you either need a niche or have to scale – and that requires capital. Every one of these operations is very forward thinking, knows how to manage a team and workload, and makes good decisions. We’re just one part of a much, much broader puzzle for what a damn good farm is going to look like and be around in 5, 10, 20 years from now.” – Ben Gordon

You can listen to the full roundtable here.

Note this is not investment advice. The information contained should be used for informational purposes.