Beef I Q -Lending to Cattle Producers and 5 C’s

Supporting cattle producers in Arkansas since 1916!

Maximizing our customers’ financial success.

Tom Cox

Senior Vice President

Farm Credit loan options:

• Short-term operating loans for cattle and operating needs - normal term 1 year

• Intermediate term loan - for cows, machinery, equipment, vehicles - 1-5 year term

• Long-term loans - real estate, farmland, homes and acreage

• Refinance existing loans for above needsMaximizing our customers’ financial success.

Why are you a beef producer?• In it for the money?• Simply love cattle?• Love the ranch and/or rural lifestyle? • Grew up raising cattle?• Need to offset some taxes?• Have the land & need to do something with it?

Maximizing our customers’ financial success.

Beef ProductionFT=Business – PT- Lifestyle

Whatever the reason for farming –A Business Plan is insightful

• 3-Question Assessment– Where has your operation been?

– Where is your operation at today?

– Where do you want your operation to go?

• A written business plan can help you and your lender understand your business, your goals and how you can work together…to maximize your financial success.

Maximizing our customers’ financial success.

• Business Description and Organization

• History and Overview of who is engaged

• Mission Statement & Goals

• Strategic Outlook and statements

• Production Situation & Projection Summary

• Agreements, contracts and rental agreements

• Financial Situation & Financial Summary

• Marketing Situation

• Summary

Maximizing our customers’ financial success.

Business PlanComponents

Five credit factors used to underwrite/analyze Farm Credit loans:

• Character - integrity and credit history

• Capital - financial position & analysis

• Capacity - ability to repay debt

• Collateral - security and margin in loan• Conditions - additional terms or loan requirements,

if necessary

Maximizing our customers’ financial success.

Lending toBeef Producers

• Every operation is different with different needs• We apply the credit factors and loan underwriting

standards to each individual operation’s needs, creating terms and conditions appropriate to FCS and the customer

• FCS approaches credit constructively, to benefit the customer’s financial success

• Proper debt structure should be important to you, and to your lender

Maximizing our customers’ financial success.

Lending toBeef Producers

• Today almost every lender relies on the borrower’s credit bureau that lists credit history and also gives each borrower a FICO Score based on how they have handled their loan payments.

• A FICO Score helps the lender answer the question, “If I make this person a loan, how likely is it that I will get paid back?” The FICO Score is a snapshot of your credit risk.

Maximizing our customers’ financial success.

Credit History &FICO Scores

• Evaluates how the borrower has handled credit cards, medical payments, installment loans, and mortgage loan payments.

• The credit history provides details on delinquent payments, collection activity, judgments, foreclosure, lawsuits, tax lien, garnishment of wages, etc.

FICO Scores >700 are desirable in the industry.

Maximizing our customers’ financial success.

Credit History &FICO Scores

• What is FICO Score?

• FICO Score is calculated statistically with information from consumer’s credit files.  FICO score ranges from 300-850.

• Almost all financial institutions use FICO score to determine your credit worthiness

Maximizing our customers’ financial success.

Credit History &FICO Scores

FICO Score Breakdown

Maximizing our customers’ financial success.

Credit History &FICO Scores

Payment History is 35%

•The best indicator is how you’ve paid your bills in the past.  Late payments, bankruptcies, collections all affect payment history.

Debt Level/Amount Owned is 30%

•The amount of debt you have compared with the overall credit limit is your credit utilization.  The higher your credit utilization the lower your score.

Maximizing our customers’ financial success.

Credit History &FICO Scores

• Length of Credit History is 15%• Longer credit history will increase your credit score• Type of Credit Usage is 10%• Having different types of credit improves your credit

score.  Mortgage, Student Loans, Credit Card debt, Store Credit debit, etc.

• New Credit/Inquiries are 10%• Too many inquiries will affect your credit score

negatively.

Maximizing our customers’ financial success.

Credit History &FICO Scores

We appreciate your participation and hope you’ll consider making

Farm Credit your lender for all your farm financing needs!

800-444-3276 800-444-3276 www.myaglender.com www.myaglender.com www.myaglender.com Maximizing our customers’ financial success.