Working Capital: How Much Should Your Farm Really Be Holding?
July 31, 2026 | Finance | Ag Lending Group Team
"How much cash should I be sitting on?" is one of the most common questions we get, and it's a fair one — nobody wants money parked in an account earning nothing when it could be paying down debt or buying equipment outright. But working capital isn't idle money. It's what keeps your operation running when a check is late, a market dips, or a growing season goes sideways.
Most ag lenders, us included, like to see farms holding somewhere between 20% and 40% of gross revenue in working capital — cash plus anything that converts to cash quickly, like grain in the bin or a marketable machinery line. Where you land in that range depends on how volatile your operation is. A diversified operation with contracted sales and crop insurance can run leaner. A single-commodity operation exposed to weather and basis swings needs more room.
Why This Number Matters More Than Your Net Worth
We've sat across the table from farms with strong balance sheets — plenty of land equity, good equipment — that were still in real trouble because they had almost no liquidity. Land doesn't pay the seed bill in April. Equity you can't touch without selling something doesn't help you weather a rough marketing year. Working capital is what actually absorbs a bad stretch without forcing a fire sale.
Calculating Your Own Number
Take your current assets — cash, grain inventory at market value, prepaid inputs, growing crops — and subtract your current liabilities, meaning anything due within twelve months: operating debt, accounts payable, the current portion of any term debt. What's left is your working capital. Divide that by your gross revenue and you'll get a percentage you can actually compare year over year.
If that number has been drifting down for a couple of years running, it's worth figuring out why before it becomes a real problem. Sometimes it's growth — you added acres and your working capital simply hasn't caught up yet, which is normal. Other times it's a sign that debt service, land costs, or family living draws have crept up faster than revenue, which is worth addressing directly rather than hoping the next good year fixes it.
Building It Back Up
If you're under that 20% floor, you don't need to fix it in one season. A revolving operating line structured with some breathing room, a term loan that stretches out debt service instead of cramming it into three years, or simply holding back part of a strong marketing year instead of plowing all of it into new iron — all of these move the number in the right direction. We'd rather help you build a cushion gradually than watch you run lean until a bad year forces the issue.
Bring us your current balance sheet and we'll walk through where your working capital actually stands, no obligation attached. It's a fifteen-minute conversation that a lot of farms wish they'd had a year earlier.