What You Need Before You Go to the Bank Presented by Farm Credit employees Jeffrey Walker and Steven Bowman at Beginning Farmer Financial Planning Workshops hosted by Farm Credit and the Farm Service Agency, September 2014

Gather Information –Pay stubs (1 month period) –Signed income tax returns (2 or 3 yrs.) –Bank statements (2 months) –Purchase contract –Construction contract/plans –Copy of deed –Business plan (start-up or transfer)

Business Plan The “road map” for the business. Tells where you want to go and what you need to do to get there.

Business Plan If your idea is feasible How much the venture will cost to start How much volume you will need to do to stay in business What legal structure is best for your situation

Business Plan Key Elements: Business Description Market Description & Analysis Operations Plan Financial Information & Analysis Appendix (Supporting Information)

Business Description Business location Owners Legal form of business History and/or start date Recent sales and profit figures Classification of business Business advisors

Market Description & Analysis Product or service Target market Market research & strategy Competitive analysis Pricing strategy Promotional strategy Distribution Location synopsis

Operations Plan Logistics Suppliers Operating regulations Human resources Risks, problems, & future plans

Financial Information & Analysis Financial statements (last 3 yrs.) Interim financial statements (YTD) List of all notes & leases payable Personal financial statements Pro forma statements (projections) Break-even analysis

Evaluate Your Credit Credit bureaus –Equifax (800) –Experian (888) –TransUnion (800)

What’s in Your Credit Report Identifying information Trade lines –Mortgage –Installment –Revolving Inquiries Public record & collection items

How Scoring Works Your score is your “FICO” score Range is 300 to 850 No one “score cutoff”

What a FICO Score Considers Payment history (35%) Amounts owed (30%) Length of credit history (15%) New credit (10%) Types of credit in use (10%)

Tips for Raising Your Score Pay your bills on time Keep balances low in relation to credit limits on revolving credit accounts Avoid opening a lot of new accounts too rapidly Do your rate shopping for a given auto or mortgage loan within a focused period of time

What the Lender Considers 5 C’s of Credit  Conditions  Character  Capital  Capacity  Collateral

Conditions Amount & purpose of loan Terms/structure of loan Environment/industry considerations Operational assessment Other lending relationships

Character Identification of legal structure Evaluation of honesty & integrity Assessment of management ability –Production –Marketing –Financial Assessment of credit history

Capital Liquidity –Working capital –Current ratio Solvency –Equity ratio –Debt-to-asset ratio Trend Comparison to peers

Capacity Profitability Cash flow Reliability of source(s) of repayment –Primary –Secondary Capital replacement needs & family living expenses Comparison to peers

Collateral Loan-to-value relationship Liquidity Degree of specialization Stability of value Durability Environmental concerns

Business Entity Options Sole proprietorship Partnership –General –Limited Limited Liability Company (LLC) Corporations –S Corp. –C Corp.

Key Documents Needed for Formation Sole Proprietorship –DBA filing

Key Documents Needed for Formation Partnership –Partnership agreement

Key Documents Needed for Formation Limited Liability Company –Articles of Organization –Operating Agreement

Key Documents Needed for Formation Corporations –Articles of Incorporation –Bylaws –Organizational Board –Resolutions to Borrow –Stock Certificates –Stock Ledger

In Review Gather & organize your information Get your credit standing in order Satisfy legal entity requirements

FCV Loan Programs Operating lines of Credit Livestock notes Equipment notes Construction notes Real estate mortgages Young & Beginning Farmer Youth loans

Contact Information Jeffrey S. Walker Team Leader 29 Military Dr. Chatham, VA (866) (toll free) (434) (mobile) Steven Bowman Loan Officer 38 Murray Farm Rd Roanoke, VA (866) (toll free) (276) (mobile)