In the News

By: Alan Stevens, Spanish Fork Branch Manager

You've decided to apply for a loan, and you're wondering what information you're going to need to complete the application. While there are exceptions to every rule, here’s what to expect a bank to ask for when you apply for a loan for your agricultural business:

1. Business plan / Repayment source

Banks are going to require a plan on how you intend to pay the loan back. Nowadays it can be short—perhaps even a lean business plan, but banks still want that standard summary of what you intend to produce, how and where you intend to do it, and how and where you intend to market it or sell it to produce income.

2. Collateral

Your business has to have hard assets it can pledge to back up the loan. Banks look very carefully at these assets to make sure they reduce the risk. For example, if you are a cattleman applying for an operating loan or a loan to purchase cattle, the bank will expect you to pledge the cattle, calves, hay, feed, and possibly equipment as security on the loan. In other words, you are saying that if you cannot repay the loan according to the terms of the agreement, the bank has recourse on the livestock, farm products, and equipment to help repay the loan.

3. Complete financial statements

The Balance Sheet has to list all your business assets, liabilities and capital. The latest balance sheet is the most important. Your Profit and Loss statements should normally go back at least three years, but exceptions can be made. For example, if you don’t have enough history, but you do have good credit and assets to pledge as collateral an exception may be made. You’ll also have to supply as much profit and loss history as you have, up to three years back.

4. All of your business’s financial details

That includes all current and past loans and debts incurred, all bank accounts, investment accounts, credit card accounts, and of course, supporting information including tax ID numbers, addresses, and complete contact information.

5. All of your personal financial details

This includes social security numbers, net worth, details on assets and liabilities such as your home, vehicles, investment accounts, credit card accounts, auto loans, mortgages, and similar items.

For businesses with multiple owners or partnerships, the bank will want financial statements from all of the owners who have significant shares.

Expect to sign a personal guarantee as part of the loan process.

6. Copies of past returns

Banks want to see personal and business tax returns.

If you're meeting with your banker for the first time and you are prepared with all of the above information, your banker will be very impressed. The banker will know that you have done your homework and take these things seriously. If you take the preparation seriously, the banker will know that you take the loan obligation seriously as well, and this will increase your ability to get your loan approved.

If you have any questions on what is needed to apply for an agriculture loan, please feel free to contact your local Western AgCredit office!