Use upcoming meetings to prepare for a successful 2020
As you prepare to close the books on this year, you’ll soon shift your attention to 2020. A good rule of thumb is to start planning your finances at the same time you start your agronomic plans for the next year, says Jessica Lehman, managing director of agribusiness banking, First Financial Bank in Fort Wayne, Ind.
To do so, schedule a meeting with your lender. In these meetings you can go over final numbers and projections for 2019, as well as talk through your options for next year, says Ashley Arrington, founder of ag consulting firm Agri Authority.
“Bankers want to know they are lending money to informed and competent operational managers,” Arrington says.
Impress your lender this fall by taking the following steps.
1. Know your numbers.
How much money do you need to operate? “If you are projected to spend $200,000 don’t demand $220,000,” Arrington says. “Don’t take the low road either; if you ask for too little and have to keep coming back asking for more you don’t appear to be a competent manager.”
Understand your key financial metrics, Lehman adds. This includes your breakeven points, profit goals, fixed and variable costs, depreciation, amortization, burn rates, etc. “If you struggle with financial statements, ask you lender to go through them with you,” she says.
2. Arrive with important documents.
Bring every document you think they will ask for and then some, Arrington suggests. This can include three years of tax returns, current financial statement, yield history (three years of each crop), results/actuals from the prior year and planned acres for the upcoming year. If possible, bring copies of contracts you have for your crops.
“If you bring everything the first time, they will not be constantly calling you for more information and can actually get your loan done,” Arrington says.
3. Be honest and open.
Financial shortfalls and budget revisions happen. “If one of the loans on your financial statement is a shortage/carryover from a prior year, explain it,” Arrington says. “Similarly, if you know there will be some negative items on your credit report, explain how and why they are there. The banker will respect your honesty.”
4 Ask questions and be ready to answer them.
Your banker’s job is to know and understand your operation. Don’t be offended if they ask you pointed questions about your financial situation, Arrington says.
“Also, feel free to ask the banker questions,” she says. “Ask them about rates, fees, structures and other services. Research and analyze your options, then you can first in line at the banker’s door to get a deal done.”
Farm Journal columnist Peter Martin shares what to include in your loan request.