Small Farm News August-September 1997
Documents the Lender May Request
from the "Small Farm Handbook"
Your resume.
Your business plan.
Financial records for each of the last three to five years, including:
- balance sheets listing assets and liabilities
- income statements (profit and loss statement)
- cash flow statements showing when and how much money is required for day-to-day operations, and when and from where it comes. you may need a loan if income lags behind sales by 30, 60, or 90 days - the customer's payment period
- income tax statements
- collectible notes and accounts receivable (dates, sources, terms)
- information on outstanding loans (lender, terms, conditions, account numbers, interest rate, maturity)
Property information
- Equipment serial numbers and descriptions
- Titles to real estate and personal property (such as machinery), particularly if these assets are to be used as security for the loan
- Insurance policies from equipment, liabilities, and crops (carrier, policynumber, amount of coverage)
Farm business information
- Value and quantity of crops listed as assets (estimated by outside party)
- Cropping plans and map of fields (including water sources, location of wells, pump information, planting dates, varieties for permanent plantings)
- Soil maps
- Lease agreements (including the cash rent or share crop agreement and what will be grown on the leased land)
- Marketing plans and contracts (including sales contracts and cooperative memberships)
- Three to five years of production history
Questions to Ask a Lender
- Can real estate be used as security?
- What is the appraisal fee?
- Is there an application or commitment fee? Is the fee returned if the loan is made? Is it returned if the loan is not made?
- Are there closing costs, inspection fees, charges for documents and who pays for them? Can they be made part of the loan?
- Will maintaining a bank account at the lending institution reduce the cost of the loan?
- What are the rate/term options?
