Peter Martin: Improve Your Loan Renewal Process

As a finance and growth consultant with K•Coe Isom, Peter Martin helps businesses identify opportunities, source capital and manage expansion challenges. ( Farm Journal Media )

Keeping your operation afloat hasn’t been this difficult for a long time. Sustained low commodity prices, trade uncertainty and inadequate tariff relief will demand changes from you if you’re going to survive.

Banks have been monitoring their ag portfolios for three years now. They can no longer discount the industry’s financial difficulties, so a challenging loan renewal season might be in store for many operations. Strong borrowers will be fine, but distressed farmers and ranchers will need to focus on best practices for a successful loan renewal.

K•Coe Isom financial consultant Kala Jenkins and I have worked closely with many ag operations, including their lenders and other business partners. We’ve observed what works and what doesn’t. Here are our recommendations for improving the loan renewal process:

Give yourself time. There’s usually a big difference between the amount of time you think the loan renewal process takes, and what it actually requires. Ag’s prolonged downturn means more information, verification, communication and time will be needed to manage through these steps. And because so many ag operations are in distress, even alternative lenders are seeing a backlog of loan applications. A process that used to take 30 to 90 days might now take twice that long.

Give your lender accurate and adequate information. That includes an overview of your operation in the past year. “Write down what’s worked, what hasn’t and a plan of action that shows how you’re going to change things going forward,” Jenkins says. Show where or how you’ve re-examined and cut expenses. Include different scenarios you can discuss with your lender. Prepare a balance sheet that offers an honest, fair market value for land, inventory and equipment. Break down income and expenses on a monthly basis so your lender knows when a readjustment in your repayment plan might be needed to fit your cash flow.

Differentiate yourself. Although lending is a numbers game, relationships still matter. Be a collaborator with your lender. Get to know bank personnel. Invite them to your farm. That’s not so easy these days, because difficult times have prompted many banks to create a firewall of sorts between loan approvers and prospective borrowers. That’s why creating a comprehensive, yet concise, annual report helps. It tells a deeper story of your operation. As part of your file, this document prevents information from getting lost or mistakes from creeping in as your application moves up the bank hierarchy. Another way to set yourself apart is to be timely with the information you provide your lender. Also, because your lender is likely working with other loan applicants in the same situation you are, be patient but persistent.  

Connect the dots for your lender. Connect your lender, accountant, crop insurance agent and marketing adviser. Collaboration among these groups can lead to less risk and better returns—what every lender seeks.   

Research your lender options. In the past few years, several alternative lenders have emerged as a source of capital for production agriculture. Research these organizations and talk with them early in the process. You don’t want to be scrambling at the eleventh hour. Have a call to introduce your farm, understand their lending criteria and start the application process. 

For additional tips to navigate the loan renewal process, visit