Don’t be surprised if your lender asks hard questions during the loan renewal season. With continued financial stress in farm country, lenders have to thoroughly assess your financial picture. What can help prove you’re a sound investment?
Be prepared, honest and organized, says Ashley Arrington, founder of ag consulting firm Agri Authority and a 10-year veteran of ag banking. Take all of the items on this checklist to your lender to make his or her job easier.
“By doing so, it demonstrates good management and shows your bank and your bank’s board that you are a good manager,” Arrington says.
For Returning Visits to Your Current Banker:
- Your most recent tax return or P&L/income statement.
- Your most recent yield history for each type of crop you produce.
- A recent and accurate financial statement for each entity.
- A list of all your loans, including all terms and payments (only if you didn’t include this in your financial statement).
- An overview of your most recent crop, including any income that was delayed into the following year for tax purposes—what you actually produced and spent.
- A projection and budget for the upcoming crop year (additional analysis is optional).
A Narrative that Includes:
- Details on any issues you’ve encountered recently and goals you’ve accomplished in the past year.
- Your short- and long-term goals for your operation.
- Your management structure and any changes that have been made in the past year.
- Your future plans, including succession if you have children who will join the operation.
For First-Time Visits to a New Banker:
- All of the items listed above.
- Three years of tax returns and/or audited financial statements.
- Three to five years of yield history for each type of crop you produce.