5 Tips for Preparing for a Meeting with Your Ag Lender
As a farmer, you know that your business is unique. You deal with unpredictable weather, crop yields that may not meet expectations, and a constantly fluctuating market. However, one aspect of farming, like any other business, is the need for funding. Whether you need to buy new equipment, expand your operations, or cover expenses during a lean period, you may need to borrow money from a lender. To ensure that you have the best possible outcome when you meet with a lender, you need to be prepared.
Assess Your Financial History
Before meeting with a lender, you must assess your financial history. You should know your credit score and what factors affect it. You should also know your net worth, an important measure of your financial health. This information will help you understand what the lender is looking for and how they may view your financial situation. In addition, you should review your financial statements for the past few years, including your income statement and balance sheet. You want to be able to explain any fluctuations in revenue or expenses and demonstrate that you have a solid plan to repay the loan.
Understand Your Credit Score
Your credit score is an essential factor in any loan application. A high credit score can make getting approved for a loan easier, and it may also result in a lower interest rate. You can obtain a copy of your credit report from any of the three major credit bureaus (Equifax, Experian, and TransUnion). Look for errors and discrepancies in the report and contact the bureau to correct them. If your credit score is lower than you would like, take steps to improve it. This can include paying off debt, making timely payments, and disputing errors on your report. Check out this article What Credit Score you need for a Farm Loan for more details.
Prepare a Financial Statement
A lender will want to see a detailed financial statement and plan. This should include a statement of your assets and liabilities (balance sheet), cash flow projections, and a plan for how you will repay the loan. You may also want to include a description of your business, competitive advantages, and future goals. Ensure the financial statement is complete and accurate, and the projections are realistic. You don't want to exaggerate your revenue or underestimate your expenses, which will only hurt your credibility with the lender. Check out this article on Understanding the Different Types of Farm Financial Statements.
Communicate Effectively with the Lender
When you meet with the lender, you want to make sure that you communicate effectively. One of the most important things you can do is to emphasize your strengths. This can include your experience, your track record of success, and your dedication to your business. You should also be honest about any challenges or obstacles you have faced but focus on how you have overcome them. You want to project confidence and competence and show that you are a good risk for the lender. Ask questions and listen carefully to the lender's responses so that you fully understand their expectations and requirements.
Follow Up After the Meeting
After the meeting, be sure to follow up with the lender. This can include sending a thank-you note or email, providing any additional information they may have requested, and checking in periodically to let them know how your business is doing. You want to maintain a positive relationship with the lender, even if they do not approve your loan application. This can help you in the future if you need to apply for another loan or if you have other financial needs.
