When applying for a farm loan, many lenders ask for a balance sheet. But preparing a balance sheet using mid-year data may not produce the most reliable financials for decision making. Following these best practices can ensure your working capital details provide lenders with a more informed view of your current standing.

1. Complete a year-end balance sheet and provide any updates since December 31, including any new debt and purchases or sales of land,  machinery, or  equipment.

Year-end numbers always provide the most reliable overview. Start with those numbers and capture any changes you implemented before the growing season.

2. Quantify your growing crop asset value by detailing input costs (fertilizer, seed, chemicals), but exclude labor expenses.

A common mistake farmers make when filling out a mid-year balance sheet is valuing their unharvested crop based on projected yields and current market prices. Only after the crop is harvested can value be assigned based on actual yield, market price, and contracted sales.

3. List your liabilities including anything purchased with special financing from an input supplier.

By listing all liabilities, you itemize the farm’s obligations and portion of term debt to be paid in the next 12 months. While a lender understands the expected payments to their institution, they need to recognize all other loan commitments.

4. Quantify any grain on hand differentiating grain already sold from what remains to be sold.

On and off-farm storage options provide more opportunity for strategic pricing. Taking inventory of your grain storage helps your lender see potential liquidity yet to come and provides a glimpse into your risk management strategy.

No matter the time of year, accurately presenting your operation’s financials builds trust and confidence in your lender relationship. While year-end balance sheets provide a baseline for decisions, a mid-year report completed correctly will be valued by a lender.

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Tommy Ayers is a vice president of credit at Farm Credit Illinois. With more than eight years of credit experience, he leads the large and agribusiness team.