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Preparing to Visit with Your Lender

Joel Larson
Educational Opportunities: 
Home > Education & Events > October 2016 > Preparing to Visit with Your Lender

How do you feel about meeting with your ag lender? Is it a meeting you look forward to or is it something that fills you with anxiety? If it isn’t something you enjoy, try thinking of it as a way to update your lender on your operation and 'tell your story.'

An effective and productive discussion begins with presenting a good set of records from your operation. You will want to use this information to show where you are and help determine where you want your operation to go. The minimum financial and production records you should prepare for this meeting include:

Updated Financial Statement

Taking the time to complete a financial statement prior to the meeting saves a significant amount of time vs. having to complete it with your lender where you might forget something. Make sure you have verified its accuracy, including all cash balances, inventories – priced and not priced – and accounts receivables. Include detailed machinery, vehicle, buildings, land and investment assets. It may be a good idea to review your depreciation schedule to make sure you haven’t missed anything.

Bring a complete listing of all your liabilities, including accounts payables and current loan balances with interest rate, payment amount, and due date. Consider providing an estimate of expected income tax payments to provide a more holistic picture. Assess your change of net worth and working capital position compared to your previous financial statement. Include year to date income and expense information. Accrual is preferred, but cash is acceptable if you also provide a previous year-end financial statement. Include capital purchases made in the current year. Include non-farm income and family living expense. If your lender has not already received it, be prepared to provide the previous year’s completed tax returns including depreciation schedule. Do you have a listing of expected income and expenses for the remainder of the year?

Production Information

Production history/crop insurance records. Inventories priced and unpriced. Current marketing plan, including cash and futures or options contracts. Include future years' contracts.

Cost of Production Information

On a per acre or per bushel basis, many producers present a margin manager type analysis.  If you know your break even, are you marketing from that information? Cash flow Projections Monthly cash flow plan for the coming year. Some producers find that FINPACK (Finflo) does a nice job laying out a projection and marketing plan. Actual to budgeted comparisons for the current or previous year. If you have a major expansion in mind, do you have a structured business plan?

Risk Management Strategy 

How do you deal with risk in your operation? Do you have adequate levels of crop insurance, property and casualty, and life insurance? You may include a personal recap of how the year has gone, including major weather and production events that impacted your operation. Taking the time to prepare this information ahead of your meeting will make for a more productive and effective meeting with less anxiety for both you and your lender.

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