10 Questions Your Lender Won’t Ask You

1. Do you have a weakness for new equipment?

It’s easy for new equipment purchases to get out of hand when dealers offer low or zero-interest loans on new equipment sales, but too much spending can severely hamper your ability to pay your debts. With current commodity prices, there isn’t much left after paying equipment loans. Lenders don’t need to ask this question, because one look at your balance sheet and a walk around your farm will usually answer this question.

2. Are you taking care of what you have or is maintenance lacking?

The condition of the farmstead may not result in your loan getting turned down, but a well-maintained farm is usually an indication of management. Lenders aren’t looking for new buildings – just buildings that look like they have had a coat of paint in the last 20 years and grass that gets mowed on a regular basis.

3. Is your herd happy and well fed?

Again, this can usually be evident just by walking through the barn or pasture.

4. How many new toys are in the garage or barn?

I toured an operation once where the producer had two helicopters, a speedboat, four snowmobiles, horses, multiple four-wheelers, and two trophy cars. Granted, this is extreme, but it is a concern in an operation where cash flow is tight. There is nothing wrong with toys, but constraint is the key.

5. Is your goal to be bigger or more profitable?

Make sure you aren’t expanding to impress the neighbors. Expansion should be well thought out and improve your profit margin.