Farmers may be meeting soon with their lender to discuss financial needs for the year. We all know
agriculture is suffering from poor economic conditions – and the outlook for many sectors of the
industry doesn’t look real promising.
A variety of factors are forcing lenders to be more critical of loan applications, according to Chris
Zoller, OSU extension educator. Let’s review a few things you can do to assist the lender as they review
loan applications.
Financial Forms:
A year-end balance sheet is helpful and provides a snapshot of the assets, liabilities and net worth of
the farm. Get in the habit of completing one each year for the lender to keep on file and for your own
reference so you can monitor changes.
Cost of Production:
Know cost of production. What is the per acre or per ton cost to grow and harvest crops?
Goals:
Why are you requesting money from the lender? What is the goal(s)? What are you hoping to accomplish with
the money you are requesting? Will you use the money as an operating loan to plant your crops? Are you
planning an expansion? Are you wanting to consolidate existing debt? Regardless of the reason, the
lender is going to need to know how you plan to repay the loan. A budget and cash flow projections will
help everyone understand how the money will be used and how it will be repaid.
Tax Returns:
A lender may request copies of tax returns. Categorize income and expenses the same way each year. This
allows the lender to compare apples-to-apples when evaluating historic income and expenses. Also, if you
pre-pay expenses or defer income, make sure the lender is aware of this so they can make accrual
adjustments.
Business Plan:
Every lender would love to see each client have a written business plan. A business plan is made up of
five parts: Executive summary, description, operations, marketing plan and financial plan.