If you’re new to farming, getting the first bank loan for your operation can be intimidating. Whether it’s for an operating loan, building improvements or a land purchase, securing financing is an inevitable part of life as a producer. Besides getting all the right paperwork together, what can you do to boost your odds of getting approval?
Step one is taking a thoughtful approach to selecting your lender. If you take the traditional route by visiting a large lending institution, you may find that it’s not a very friendly place for someone starting out. They may take a strict stick-to-the-figures approach that doesn’t take into account the rest of your plan.
A community lender has a slightly different set of traditions. In addition to doing a deep dive into your balance sheet and business plan, they also look at the person asking for the loan. Make no mistake, if you come in with a business plan that doesn't make sense, or with a credit score showing a long record of late payments, you won't get very far. But when you’re starting out, a lender at a community bank can be the resource you need to build your operation.
This blog walks you through the things you’ll need when applying for an operating loan. We’ll also offer practical tips when it comes to making a great impression during the lending process.
Not all loans are alike. Some turn around in a matter of hours, while others require weeks of preparation, with a lengthy approval process. While you’re making plans, be sure and do your homework on the lending process for the loan you’re looking for, so you can build that into your timeline.
You can even brag a bit about school, community projects and work. Talk up your achievements, your contributions, anything that gives a lender a broader picture of your character. This information tells the lender something about your determination, your sense of responsibility and your abilities to take on a challenge and see it through. Because you’re getting into a business where success isn’t guaranteed, those characteristics mean a lot to lenders.
For many beginning farmers taking over an operation from a family member, family support is one piece of the financing package. In addition to being prepared to talk about that, you’ll also want to fill out the picture. What are your transition plans? Which experiences prepared you for this moment? Talk about your mentors, on and off the farm, especially if you can still lean on their expertise as you take the wheel.
Much like a job interview for a highly skilled position, you’ll want to convey to the lender that you’re prepared and confident in your abilities to execute your plan. While your business plan and documentation are important, so is your manner. To sharpen your presentation skills, it can help to practice in front of a friend, or record yourself on video for later viewing and critiquing.
The lender’s role isn’t to tell you how to farm or run your operation. But a good ag lender will have the experience — both on the physical farm and the financial side of things — to talk you through your options. The idea is to help you make the best-informed choices for your operation. Showing a willingness to consider alternatives and take constructive feedback can go a long way with your lender — or anywhere you seek help, for that matter.
At Minnwest Bank, our ag lenders are members of your community, and we're committed to helping your farm thrive. Schedule an appointment today.