Taking out a farm loan is no tiny transaction these days. Obviously banks need to know you’re a strong investment in borrowing funds.
Peter Martin, finance consultant at Kennedy and Coe, says at the end of the day, your banker needs to know the risks in lending to you and how to mitigate those risks.
"One of the biggest mistake you can make as a borrower is walking into your bank, dropping off your statements then leaving."
So, when you dump off a set of financials statements to your lender, what are they looking for?
Martin says your financial records should have these characteristics:
- Complete and global
- Accrual vs. cash
- Borrower prepared
- CPA compiled, reviewed and audited
"You want to make sure your lender can pick up your statement and instantly understand your operation. Your bank needs to understand all of your liabilities and income."
Tips to Make Your Banker Happy
Martin says the relationship with your banker can be vital to the success of your operation.
He suggests that if you compile your statements yourself, you should have someone else look them over. By doing this, you can remove any personal errors you may have made and make the statements stronger.
In addition, he says you should make sure you banker has met all of your management team. On the flip side, Martin also says you should know all of your banker’s coworkers who may have an impact on your borrowing needs.
A simple tip Martin provides, is to always be timely with the paperwork you owe your banker. "It never ceases to amaze me by how much people frustrate their bankers by not getting them papers in a timely fashion."
Martin spoke at the 2012 Top Producer Seminar in Chicago, Ill.
See all of the news, photos, videos and more from the 2012 Top Producer Seminar in Chicago, Ill.