Lenders say detailed farm records critical for loan applications

Farmers hit by bad weather or low prices in 2001 should prepare to visit their bankers as early as possible, with farm records as detailed as possible, to improve chances of favorable response to 2002 operating loan applications.

“It's going to be tough for a lot of farmers who had a bust this past year,” says Bob Brown, executive vice president, Farm Credit Bank of Texas. “But, even if a farmer did not make a profit, good records showing a history of profitable operation will help him get a loan.

“Farmers have got to keep better records than they have in the past,” Brown says. “A complete financial analysis is a must.”

Brown, who works from the Texas Farm Credit Bank headquarters in Austin, says farmers mired in red ink this fall should pull financial analyses together as quickly as possible and arrange to see lenders early.

“Bankers don't like surprises,” he says. “We try to stick with good farmers through good times and bad, but bank regulations limit how far we can go. Complete records that prove a farmer can make a profitable crop will go a long way toward getting an operating loan.”

Brown says lenders will look at enterprise mixes, yield history, marketing strategies, insurance coverage and past profit. “We'll look at the whole operation, not just one aspect,” he says.

He says operating loans, year-to-year funds, may depend on crops planted, marketing techniques employed and overall success of the farm.

“For long-term loans, past history is critical. We're a little nervous about farmers who move around a lot or switch commodities often. We like stability. We support employing new technology, but with new enterprises we like a gradual transition instead of frequent movement from one crop to another.”

“Equity in assets,” Brown says, “will be a key to loans this year. Marginal equity in assets will receive a lot closer scrutiny than in the past. Farmers with little equity will need to show more detailed records proving production history. They need to show profit potential over a long term.”

Brown says funding should be adequate for qualified borrowers. “We don't anticipate a shortage,” he says. “And no one seems totally negative about the farm sector. We want to stay with true farmers who show profitability during good times.”

Brown says a big question for producers and lenders will be what form the next farm legislation will take.

“Will it be the bill the House passed? Will it be the Lugar bill? Or will it be a modified version of each? I think it likely will be a compromise between the House and a Senate versions.”

He says the final law likely will include more conservation provisions than does current legislation. “That's not all bad for farmers, but they will have to learn how to claim what they have done in the past and what they're doing now to qualify for available funds.

“We know farmers are by nature conservationists, but they don't always get credit for what they're doing. I hope conservation provisions will include a means to measure farm performance.”

Brown says farmers deserve legislation that “recognizes that we all have to eat. Farmers are taken for granted.”

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