It Is Not About Your Equity

by Peter Martin | AgWeb.com

Like most farmers, the bulk of your net worth is likely in the equity of your ground. But you might have discovered a “land rich” net worth, even a sizeable one, doesn’t assure banks will approve a loan renewal.

Generally speaking, ag lenders are cash-flow lenders. Like you, they don’t like low commodity prices. While your net worth is important to them, they’re far more interested in a positive cash flow that allows loan payments to be made as agreed. That’s not easy today. Many of you are struggling to pencil out a breakeven, let alone a profit. And then there are loan payments. As a result, many farmers face troubled loan renewals. Don’t fall for the flawed argument that equity alone will get you through your renewal, but do tout your equity as additional support for your request. READ MORE

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