How to make best impression to your bank
There is a lot involved in an Agribusiness loan application. You’ve got to prepare financial documents, pull together forecasts and show your farm can repay the debt. With our experience working with over 20 different lenders, we’ve understood these difficulties and, importantly, what makes the best impression.
This article provides tips and hints on the information you need to present to the bank to put you in a strong position. To get there, you need to provide information that falls under two categories; background and overview, the numbers, business planning and forecasts to show the resilience of the operation.
1. Background and Overview
As it sounds, this is the opportunity to give the lender a background and overview of the farm and provide information that falls under these subgroups.
Big picture of the farm
Look at this as the introduction to your business. Start with an overview; production, farm history, the length of your involvement and past growth. Finally, you should also include the ownership and trading structure of the farm, for example, a family trust.
With the big picture documented, you’ll also need to provide an organisational chart that includes information on how long the farm has been operating, who does what within the business, finally, include the names and ages of family members.
Layout what you’re asking for
Explain clearly how much you’d like to borrow and why you want the loan; for example, do you want to expand the farm?
If the farm business is split into different entities, you’ll need to explain which entity is borrowing the money.
2. Business Performance and Planning
In this section, you should outline the performance of the business and show that you have a plan.
Provide historical financial statements so you can show the performance of the farm in previous years. You’ll also need to explain losses if you hit a terrible season. It’s a good idea to provide the last three years of financial information and tax returns for all entities involved in the farm.
You’ll also want to hand over a three-year cash flow forecast along with your rationale and assumptions in coming up with the estimates. It’s best to lean on the conservative side with estimates on production.
It is good to give the bank an assets and liabilities report that includes everything connected to the farm and personally. All this information combined provides the bank with a solid understanding of the farm’s financial performance and any liabilities it is carrying.
A business plan works alongside your cash flow forecasts as it shows where you see the farm in three to five years. It articulates your goals for the business and will capture any plans to grow, venture into new production and who will be doing what.
Presentation is key to a successful application, so take the time to prepare documents and forecasts ahead of time and make sure they are in one location. When meeting the bank, you look and act professionally.
We can’t guarantee this will get you a loan, but if you follow these suggestions, you put yourself in the firmest place for a yes.
If anything is unclear in your application, or if you want help pulling together your application, Sprout Agribusiness is here to help.
Please speak to your Sprout Agribusiness Advisor for further information