Ag Credit Analysis

Ag Credit Analysis
Ag Credit Analysis

How can loan repayment alternatives for agricultural loans be evaluated, for not only the upcoming year but also for future years that may not be as profitable, but do it in a timely and cost-effective manner? The agricultural lending environment has changed dramatically from the relatively low income years of 2014-2019. Government payments and improved commodity prices have improved the financial condition and performance of many agricultural producers. So, now the question has changed from how to make the principal payments on term debt during low income years, to how to finance the purchase of capital items such as farm machinery and equipment and how much to loan? orrowing to purchase capital items requires profitability from which to make principal payments, but not just for the current year but for years throughout the repayment schedule. The financial condition and performance varies widely across producers. A review of the financial information needed to make informed decisions and a spreadsheet to evaluate repayment alternatives is covered during this workshop. The spreadsheet is also used to evaluate the sensitivity of varying amounts of gross revenue needed to breakeven a farming operation, with and without amounts needed to make additional principal payments on term debt. The analysis will be conducted for both low and more highly leverage farming operations.

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