Depending on the account and institution, the loan process and review can vary. Most often, a producer’s first point of contact is the loan officer. You meet with your loan officer and that individual collects your financial and management data.
In some cases, after conducting analysis, the loan officer will inform you on the status of your request. This often depends on the size of the loan, tenure and experience of the loan officer, bank policy and limits on loan authority.
In other cases, these point people will collect information and then, a credit analyst conducts analysis and review, sometimes observing three to five year financial trends. In still other situations, your information will be packaged and sent to a loan committee for determination on your account.
In order to move through the loan process as efficiently and successfully as possible, it is important to know the different steps. If approved, your loan will be officially filed and then, monitored intensely by an internal review team as well as external regulators. If your institution is a commercial bank, the review can be on both the state and federal levels.
If your account is with a Farm Credit Association, internal and external reviews will still take place but Farm Credit Administration (FCA) is responsible for the external oversight.
One of the first elements regulators will examine is the quality of your financial records. Specifically, they will look for updated balance sheets, tax records, and possible cash flows.
Do not be surprised if regulators want serial numbers on equipment, livestock identification and other accountability measures on grain and crop inventories. The paperwork and requests for information will only increase as regulators attempt to protect the safety and soundness of the financial system.
Regulators will also review loan agreements and covenants. Moving forward, regulators will expect loan officers to increase their level of supervision and enforcement on accounts if the economic downturn continues. In addition, if you are a larger agriculture producer, audited financial statements and accrual adjusted financials will most likely be required.
Finally, regulators will look for concentration of debt in the portfolios of lending institutions. This marks the biggest difference between the 1980s farm crisis and the current downturn. Thirty years ago, debt was much more evenly dispersed over a broader segment of accounts.
In general, larger businesses need to prepare for tighter scrutiny and additional oversight from several places. Quality records increase your level of protection as well as your resources. For the loan process, the better prepared you are, the faster and more successful the process will be.