Chances are this has happened to you. The reason for this could be the obvious- your lender is busy with other applications or possibly out of the office. There isn’t much you can do about this other than letting your lender know up front that you need an answer by a certain date so they can better accommodate your request.
More often than not, the reason for the delay is due to incomplete or inaccurate information that you provided your lender or your lender doesn’t have a clear picture of your operation. The quality of the information provided to your lender has a direct impact on whether or not your loan is approved. By providing the following information, you can help to ensure you get your answer sooner:
I can’t stress the word “detailed” enough. If you operate as an entity, you will also need to provide a personal balance sheet.
In order for a lender to know if you can repay your loan, they need to know the terms of all of your other loans.
I always ask for a couple of older balance sheets so I can see how the operation has changed over the years.
If your operation isn’t changing, your lender will generally use historical averages. If the new loan will be accompanied by changes in your operation, you will need to provide income and expense projections to account for the changing operation.
Be upfront about any late payments or problems that will show up on your credit report. Discuss why the problem occurred and what you did to correct the problem.
The lender needs to know who has the authority to sign on behalf of the entity. Provide copies up front.
Provide complete copies of your federal tax returns with all of the schedules for at least three years. Some lenders may want four years, but usually three will be enough. If you have had a difficult year, it may be helpful to provide an additional year so that the lender can see how a typical year looks.
Your lender is going to look at past income and expenses. Providing them with yield history, acres farmed, and livestock inventory numbers will supply them with a lot of answers to explain fluctuating income and expense numbers.
8. Operation Description
This is probably one of the most important things that you can provide your lender. This document should be an ongoing document that you add to or revise each year. This document should:
You may look at this list and think, “My lender knows my operation so I don’t need to provide all that stuff,” but what happens if your loan officer leaves the bank? Someone new will need to get familiar with your account and they will be glad you were prepared. Your lender also has more than one loan to keep up with, so if he/she knows you always provide good information, they are more likely to move your loan to the top of the stack. Chances are your lender will still have some questions for you, but providing this information up front will save you a lot of time.
Kathy Daily is the Managing Director of First Financial Bank’s Farm and Ranch Division. Mrs. Daily has been an agricultural lender for over 25 years.