FARM AND RANCH CREDIT

1. FARM AND RANCH CREDIT • BASIC LENDING PRINCIPLES • HUMAN/MANAGEMENT FACTORS • FINANCIAL POSITION AND PROGRESS • REPAYMENT CAPACITY • COLLATERAL • LOAN PURPOSE

2. HUMAN / MANAGEMENT FACTORS • CHARACTER • HONESTY • DETERMINATION TO MEET OBLIGATIONS • PERFORMANCE RECORD • WILLINGNESS TO COOPERATE

3. PERSONAL FINANCIAL HISTORY • CREDIT REPORT • SLOW PAY • BANKRUPTCY • JUDGMENTS • BAD CREDIT • MANAGEMENT ABILITY

4. FINANCIAL POSITION AND PROGRESS • SHOULD PROVIDE FINANCIAL STATEMENTS • AT MINIMUM AN UPDATED YEAR-END BALANCE SHEET • LOOK AT • ACCRUED LIABILITIES • CONTINGENT LIABILITIES

5. UNAVAILABLE ASSETS • HOMESTEAD EQUITY • CO-OP STOCK • NON-PRODUCTIVE ASSETS • NET WORTH OR EQUITY PROVIDES A MEASURE OF RISK-BEARING CAPACITY

6. REPAYMENT CAPACITY • SHORT TERM REPAYMENT CAPACITY IS PRIMARILY DETERMINED BY CASH FLOW PROJECTIONS • BORROWERS TEND TO OVERESTIMATE REVENUES AND UNDERESTIMATE EXPENDITURES

7. PROFITABILITY ANALYSIS IS INCREASING IN IMPORTANCE

8. COLLATERAL • THE PURPOSE OF COLLATERAL IS TO SECURE THE LOAN AND PROVIDE A SOURCE OF REPAYMENT IN THE EVENT THE LOAN IS NOT REPAID DUE TO DEFAULT, DEATH OR DISABILITY

9. EVALUATE COLLATERAL VALUE AS THE EXPECTED VALUE AT THE DUE DATE OF THE NOTE OR AT THE DATE OF NEXT PAYMENT • COLLATERAL VALUE CAN DECLINE OVER TIME (ie. EQUIPMENT)

10. LOAN PURPOSE • A SOUND LOAN IS ONE THAT EFFECTS THE PROFITABILITY OF THE BUSINESS AND PROVIDES A SOURCE OF REPAYMENT • THE PURPOSE OF THE LOAN CAN DETERMINE THE REPAYMENT TERMS