Horses are expensive, whether you own a huge equestrian facility or just a couple of “ponies in the backyard.” However, when you decide to start a horse business, finances should be one of your top priorities because without the necessary capital, you won’t be able to get very far. To finance a horse business, you must have a detailed money management plan that takes into account all contingencies.

There are hundreds of different types of horse businesses, each of which is unique and requires different amenities. Therefore, your financial plans must be tailored to your individual idea and you must separate in your mind the elements that need versus those you will just do want. For example, a horse stable where the owner teaches lodging and riding classes. might have a covered arena, but it is not a requirement.

Check your current finances

Before you can finance a horse business, you will 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 money that you can turn into cash in the blink of an eye, money that can be used to buy things now.

Also, your starting capital does not 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 with borrowed dough because there is no guarantee of success. If it takes three years for your business to get out of the red, you’ll owe that money much sooner.

Prepare a business plan

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

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

However, keep in mind that in order to finance a horse business, you will have to deal with unexpected expenses that come up along the way. No matter how prepared you are, it is almost impossible to plan all possible scenarios. This means that you must have enough capital to cover not only your expected costs, but also those you did not anticipate.

Calculate your tolerance for financial risk

To finance a horse business, you will likely need to borrow at least a portion of the startup capital needed to get the operation up and running. Very few people can do this out of pocket, and even if you can, it is important to leave some free cash for personal emergencies. Don’t drop every penny out of your savings account on none fledgling business.

Personally, I have a very low financial risk tolerance and 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 reinforce their own equity with 50 percent or even 75 percent borrowed money. It is a personal decision that you will have to make.

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

Borrow the money

If you have decided that you want to finance a horse business by obtaining loans or lines of credit, you will need to find the best possible rates and make smart financial decisions. Accepting a line of credit with a high interest rate will mean that your expenses will increase significantly once your equestrian business is up and running. It will take much longer before you make a profit.

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

Talk to at least three different banks or credit unions before deciding where to apply for a loan. Ask about things like prepayment penalties, APRs, grace periods, and other factors that will determine how and when the loan will be repaid. If you have an excellent credit rating, it shouldn’t be difficult to get the terms you want.

Get ready for a fight

Financing a horse business is never easy, and sometimes downright frustrating. However, it helps to keep your end goal in mind and focus on what you will do with the money once you get your hands on it. Be sure to use the motto of a logical and reasonable method to ensure your financial security so that you don’t find yourself in a bind in the future.