Tips To Prepare To Meet With Your Lender

Because of the economic environment, securing an operating loan will not only be more difficult, but will take longer to process this year. ( Farm Journal )

It’s no secret farmers across the country are facing financial uncertainty. Lower income continues to strain working capital. On average, bank CEOs in the Midwest expect farm loan defaults to rise by 5% over the next year, per Creighton University’s November 2018 Rural Mainstreet Index.

Because of the economic environment, securing an operating loan will not only be more difficult, but will take longer to process this year.

“We’ve got to analyze things further and we’ve ramped up our financial reporting and monitoring processes because our margin for error is very, very small,” says Sam Miller, managing director of agriculture lending for BMO Harris Bank. “We’ve got to make sure we get the money paid back.”

Be patient and transparent with your lender, says Ashley Arrington, founder of ag consulting firm Agri Authority and a 10-year veteran of ag banking. “That will go miles, especially when we’re seeing a lot of new lender relationships,” she says.

Preparation, teamwork and not being afraid to ask questions is key for your lender meeting, says Greg Steele, senior dairy lending specialist with Compeer Financial. “There’s never a stupid or silly question.”

An organized application will have a much quicker trip through the approval process, Arrington explains. Because most farmers apply for 

operating loans at the same time, bankers can have 50 applications on their desk at once. They are most likely to process the well-prepared and complete applications first.

Regular communication with your lender is critical, says Peter Martin, a K•Coe Isom principal. “Provide key

financials as well as an annual narrative that tells the story behind the numbers,” Martin recommends. Discuss capital expenditures, major changes in operations, key employee turnover and deviations from your budget. Include the positives, as well as the negatives.

Checklist For A Loan Renewal Meeting

Be prepared, honest and organized when meeting with your lender, says Ashley Arrington, founder of ag consulting firm Agri Authority. “By doing so, it demonstrates good management and shows your bank, and your bank’s board, that you are a good manager,” she says. Walk in with these items:

For visits to your current banker:

q Your most recent tax return or profit and loss and income statements.

q Last year’s yield history for each crop you produce.

Recent, completed and accurately prepared financial statements
(personal and for every entity of your operation).

A debt list of all your loans with all terms and payments.

An overview or actual statement on last year’s crops, including any income that was delayed into the following year for tax purposes.

qA projection and budget for the upcoming crop year.

A narrative that includes:

• Details on any issues you have encountered recently.

• Goals you have accomplished in the past year, as well as future
short-term and long-term goals.

• Your management structure and any changes made in the past year.

• Your management succession plan, naming specific people.

For visits with a new banker:

All of the above and:

q Three years of tax returns and/or audited financial statements.

q Three to five years of yield history for each crop you produce.

 

Learn more from Peter Martin and Ashley Arrington at the 2019 Top Producer Summit January 15-17 in Chicago.  REGISTER HERE.

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