Know what documents are required when applying for an agricultural loan.
Most farmers and ranchers will agree that time is a limited resource that impacts all aspects of their operation. As we’ve come to witness first-hand in working with our nation’s farmers and ranchers, the expectations around the loan application and approval process are rather low and not exactly positive.
By opening up and sharing their frustrations, fears, and weaknesses, they’ve helped our team develop a deeper understanding of what they need in an industry ally and in their ag lender. We recognize that transparency, consistent communication, and straightforward, efficient processes are critical to helping them remain focused on what matters most, their land.
Using what we’ve learned and putting it into play, we are providing an overview of the 12 common documents needed when applying for a land loan. Take a look at the infographic below to learn what type of information is provided in each of the documents, how we use this information to build better loan terms and conditions, and how your information is kept private and secure.
Here is a summary of the top 12 required documents needed when applying for a land loan:
1. Loan Application and Borrower’s Authorization
2. Identification of Proposed Collateral
3. Federal Tax Returns
4. Balance Sheets
5. Income Statements
6. Current Market and Crop Inventory
7. APH Yield Reports
8. Equipment List
9. A/R and A/P Aging Reports
10. Debt Schedule
11. Asset and Debt Statements (Bank Statements)
12. Income and Expense Forecasts
The Importance of Providing Financial and Operational Documents to Your Ag Lender
Our team has a deep-rooted respect for the work that you do, and as so, we’re committed to making the loan application process run smoothly. At the start, we take the time to get to know your history as an operator; how your operation works; what barriers you’ve faced historically and today; and what your long-term goals are for the farm or ranch. As you gather and complete the required documentation, please keep in mind that the information you provide helps us gather answers to these questions and represents your operation more accurately in our loan narratives.
Here’s how each document provides a vital piece of information about your operation:
Loan Application and Borrower’s Authorization
The loan application is a standard document needed for a farm loan. It introduces your operation and provides us, the lender, with permission to perform a background and/or credit check. Without this document we cannot begin building a loan product for your operation.
Identification of Proposed Collateral
As a land lender, it’s pertinent for us to receive up-to-date and accurate information on any land which will be used as collateral for the loan. This information is factored into the custom terms for your loan. This document includes information on parcel IDs, county, state, name of the entity holding the title, and the estimated market value.
Federal Tax Returns
Information such as gains and losses, tax structure, and general operating details is collected from federal tax returns and helps us structure the loan terms so that your risk as a borrower is kept to a minimum.
Used hand-in-hand with your income statements, year-to-date balance sheets paint a clearer picture of your business obligations and operational assets that are not yet tangible. For instance, if seed payments are listed in your balance sheet, we may be able to use the value from your investment to offset the expense.
Combined with your balance sheet, your income statements help reveal important information about your spending behavior, history of producing income, and your overall capacity to service debt. It also helps us determine if you generate enough income to cover your obligations in the short term.
Current Livestock and Crop Inventory
We recognize the monetary value that is invested into the ground during planting season. Your current livestock and crop inventory sheet helps us to tangibly capture your investment and use it favorable when valuing your assets.
APH Yield Reports
Actual Production History reports provide the greatest context around your operation’s performance over the course of ten years. APH policies, which insure producers against yield losses due to natural causes, help us to avoid using state averages, which are often much lower.
Agricultural equipment is vital to the work that you do. We understand that not having the proper equipment can hinder the performance of your operation. For this reason, we use the equipment list to assess risk and make adjustments to your loan structure to ensure that you will have the capacity to service both your loan and your equipment.
A/R and A/P Aging Reports
Accounts Receivable (A/R) and Accounts Payable (A/P) Aging Reports, help provide the information that is not detailed in the bigger, general financial statements and balance sheets. It also helps us determine the likelihood of collection, which can potentially strengthen your application.
In combination with the other documents, the debt schedule provides the historical picture of your business, which enables us to focus on your strengths while offsetting any weaknesses. For example, we understand that farming requires investment, such as land and equipment purchases. We don’t just see those as debts and liabilities, we also see that they contribute to you growing your earnings in the future.
Asset and Debt Statements
These statements are used to bridge gaps found in the balance sheets. It helps to verify your line items, which helps to better depict your current financial standing.
Income and Expense Forecasts
In order for us to help you reach your long-term operational goals, we must first understand what your plan is for paying down your farm debt. Having a clear idea of next year’s projected income and expenses enables us to build a more flexible product.
To learn more, download our Understanding the 12 Common Documents whitepaper that explains each document in-depth and provides more information on loan programs.
Taking the Next Steps Towards a Secure Financial Future
As a non-bank lender, we have the flexibility to offer customized tier-priced, borrower-specific solutions based on your personal financial goals and your operation’s unique needs. Speak with one of our lending experts at email@example.com or 844.516.8176 to learn more about our spectrum of loan options.