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Don't Go Broke
A successful annual appointment to keep you afloat.
Renewing your farm's operating line of credit is an essential process to ensure your operation runs smoothly from year to year. Working closely with your banker and preparing effectively for this meeting can make all the difference. To make the renewal process as successful as possible, follow these steps both leading up to and during the meeting.
Step 1: Review Your Farm’s Financial Performance
Before approaching your bank, thoroughly review your farm's financial performance over the past year. Your lender will expect you to have a clear understanding of how your farm has been performing financially, and this will be crucial for securing a renewal.
Profit and Loss Statement: Review the income and expenses over the past year. Make sure you can explain any significant changes in both categories.
Balance Sheet: Review assets, liabilities, and equity. Pay particular attention to any changes in debt levels, particularly if your farm has taken on new liabilities.
Cash Flow: Understanding your cash flow is key. Make sure you know the timing of your revenue streams and expenses, especially if there are any seasonal variations.
Step 2: Prepare Your Upcoming Projections
While reviewing your historical performance is important, your banker will also want to know where your farm is headed. Projections are essential tools for demonstrating your ability to manage the operating line of credit and repay debt.
Cash Flow Projections: These should include all income and expense estimates for the upcoming year. Details around these forecasts should be provided for realistic estimates of income/expenses based on past trends and current market conditions.
Crop Projections: What crop are you planting in which fields? What are your estimated yields? Is the crop irrigated or on dryland acres? How many acres and is the farm owned or rented? If the farm is rented, what are the rental terms. These answers should support your cash flow projection.
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Need help with your operation's financials?
Have you updated your financial statements for the year?
Did you complete a review of your position with your lender?
If not, this is a dangerous step to skip. How will you know if you are in a position to buy ground (and how much ground) without getting a lender's feedback? How can you learn anything new without a review?
If you missed this crucial step during your renewal appointment, there is still time. I've opened up 30-minute financial review consultations helping you:
Update your balance sheet for the year if not yet completed.
Give feedback on the strengths and weaknesses of your position.
Help you plan for growth.
Sign-up here if my services can benefit your operation:
Also, I want to continue bringing you the resources to help you grow while in a healthy financial position. If you ever have an interest in the Farm Buying Toolbox, sign-up here:
I can’t wait to be in touch and start helping you toward your goals.
Have a great week!
Grant
