As summer begins to cool, harvest seems right around the corner. And just beyond harvest is loan renewal season. Soon growers across the country will begin meeting with lenders to discuss the past year and their expectations for the next.
With record high inflation, pain at the pump, climate-related challenges and supply shortages, farmers have had to navigate rocky soil the past few years. This year we may see more ag operations planning to work with lenders and other business partners, so it is critical for borrowers to focus on best practices for a smooth and successful loan renewal process.
Here are five guidelines to ensure a successful experience this year.
Guidelines for improving your loan renewal process
- Build a healthy relationship with your lender. A loan is not just about the numbers – relationships still matter. Being collaborative, responsive, and personable with your lender all year – not just during renewal – will set you apart and create a better experience as you work together. This will positively impact every other aspect of the process.
- Give yourself time. There is usually a big difference between the amount of time you think loan renewal will take and the time it ends up taking. With more ag operations seeking assistance, lenders may see a backlog of applications, extending the process from the typical 30-90 days to possibly twice that long. So, it’s critical to get started early and give yourself and your lender breathing room.
- Provide your lender with accurate and adequate information. The more information and hard data you can provide, the better. Prioritize three key items: an overview of your business for the past year, a balance sheet with fair market value for land, inventory and equipment, and a breakdown of your monthly income and expenses. “A breakdown of expenses helps your lender know when a readjustment in your repayment plan might be needed to fit your cash flow,” says Kala Jenkins, Pinion financial consultant.
- Make the connections. Collaboration between your lender, accountant, crop insurance agent and marketing adviser can lead to less risk and better returns. They each know your business from a different angle and depth, so joining their resources and knowledge could help you and your lender make better decisions. So, make the introductions for your lender.
- Explore alternative lending options. The best decisions are rarely made when you feel backed into a corner. Over the past few years, several alternative lenders have emerged as a source of capital for agriculture producers. It is beneficial to research your options, while understanding that not every lender will be the right fit for your needs. Jenkins advises, “Whether traditional or alternative – make sure that your lender is the right size for your business and that it aligns with your needs and values as a farming operation.”
These steps can set you up for success as you begin your loan renewal process, so you don’t have to be scrambling at the eleventh hour.