“Lenders really haven’t changed their loan underwriting standards,” Mike Hosterman, AgChoice Farm Credit agricultural business consultant explains. It may just seem that way.
What has changed is that lenders have become much less flexible about bending the rules and much more demanding of farm financial data.
“They want more information, more written plans,” Hosterman says. “They want multi-year cash-flows, written contingency plans, budgets, farm liquidity goals, and general farm goals. They want written risk-management plans.
“We’re not just talking about price protection,” he adds. The goal of these risk-management plans should be about margin protection, not just to achieve the highest possible price. And again, these need to be written plans that include action triggers and your overall strategy. Plus, these plans must be followed, not written up and then put in a drawer and forgotten.
And lenders want to hear from you more often, whether you use risk-management tools supplied by your co-op, a brokerage firm or livestock gross margin for dairy insurance program.