Good Records are Key

If you think you just need to keep your records for tax purposes, you could be missing profit opportunities. If you are not keeping detailed records, there are plenty of resources to help you get started including your Farm Credit account executive.

Whenever the topic of records comes to mind, everyone immediately thinks of financial records or the records needed to prepare tax returns. While certainly important, they are not the only records needed for a farm operator to assure himself of maximum profits. What records are needed? Obviously, it starts with financial records, and includes production records, capital asset records, environmental and health records and personnel records.

Financial Records. The most basic of all records are those needed to prepare a business’ annual income tax return. For far too many businesses, this is both the beginning and end of records. Big mistake! Financial records should go far beyond what is needed for the preparation of taxes. For example, tax returns require only the dollar amount of sale, while good financial records will record individual sales, the detail of the sales and organize it all in a way that makes possible management reports based on those records possible. While the sale matters, so does pricing, promptness of payment and shrinkage.

Production Records. Good production records go far beyond corn yields or milk per cow. The best of them integrate the farm’s financial records to allow the operator to closely follow the true profits of a given enterprise. A dairy cow is a great example of this. Suppose the farmer has two cows, one produces 20,000 pounds of milk per year and the other 28,000 pounds. If this is the extent of records, the more valuable cow would seem to be obvious. But consider that the 20,000-pound cow calves every 12 months, while the 28,000-pound cow calves every 18 months. In a three-year period, the 20,000-pound cow produces 60,000 pounds of milk and three calves, while the 28,000-pound cow produces 56,000 pounds of milk and two calves. Without the records, you wouldn’t know which cow is more profitable.

Capital Asset Records. When did you buy that piece of equipment and for how much? These are important considerations, now that it is not uncommon for single pieces of equipment to cost over $250,000. Further, what does it cost to operate the piece? Good capital asset records will be well organized and work hand-in-hand with the depreciation schedule of the business.

Environmental and Health Records. Environmental and health records have been increasing in importance for quite a while and this trend will continue. What did you do with your manure? What spray did you use, where was it applied and by whom? What was given to your animals, when and by whom? An error here could cost you the farm!

Personnel Records. Employee’s pay records are critically important: if everything is not done correctly and records are not properly kept, the farmer will experience much distress. Simple things, like a file for each employee that is maintained for years after the employee departs, must be standard procedure. This file must contain authorizations for any withholdings, as well as personal information such as address, marital status and social security number. Also important are job applications, evaluations and time-off records; to say nothing of time cards and pay rates. It wasn’t that long ago that a farmer could be profitable and secure if he properly tilled the soil, planted and harvested on time. While still true today, it is now also important that records of many types be topnotch. It is for this reason MSC Business Services offers accountants that specialize in ag accounting, lease software specifically designed for farmers, offers a Payroll Service for farmers and can perform consultations in all areas of concern to today’s farmer.

Article complements of Mike Evanish, MSC Business Services

There's more to a loan than just the rate!

Just about every day of the week, we get calls that go something like this:

Customer: I just got a better rate at the bank than what you offered me on my farm loan.

Us: What fees and costs do you have to pay?

Customer: I didn’t ask.

Us: Please ask them what the fees and closing costs are, then we can compare the two deals.

This customer—like a lot of customers—just assumed that the rate was the only item to consider when shopping around for a loan. Actually, there are many things to consider in choosing a lender and some of these may be even more important than the loan rate.

For example: if a lender has a rate that is one percent cheaper than another—but the loan fees and closing costs are one percent of the loan—then you really wouldn’t save much. The total deal must be evaluated to compare one to another. It is important when comparing loan information from competing lenders to take all of these items into consideration.

At MidAtlantic Farm Credit we offer competitive rates, costs and fees. We strive to give above average service—as we want satisfied customers. But we don’t just stop there. As a cooperative lender, MAFC has returned millions of dollars to our borrowers through patronage refunds!

If you didn't already know, we just distributed over $26.5 million to our borrowers in April. The lawyers won’t let us tell you that you’ll get a guaranteed patronage payment every year. But our history speaks pretty loudly: since 1990, MidAtlantic has declared $371 million in Patronage and has distributed Cash of $249 million!!

If you have loans through other banks, and their not putting their profits in your profits, you might just want to give us a call. Because it pays to do business with Farm Credit.

MidAtlantic Farm Credit Announces Grand Prize Winner

MidAtlantic Farm Credit announced the winner of their annual meeting grand prize, a John Deere Gator. The winner was Leo Duncan of Frederick, MD. (View the YouTube video of the prize presentation.)

Mr. Duncan is a retired athletic director and math teacher who moved back to his family farm in Frederick county about 13 years ago where he now assists his brothers with their beef and hay operations.

When the prize was delivered to his farm, Mr. Duncan said, "I just can’t believe I won. There are all kinds of odd jobs we can use it for around the farm. I know my brothers and I will get a lot of use out of it.”

Mr. Duncan was one of 1,400 attendees at MidAtlanic's stockholder meetings, held earlier this month throughout Pennsylvania, Delaware, Maryland, and Virginia. All meeting attendees were eligible for the prize, which was awarded in a random drawing.

The grand prize, a John Deere Gator XUV 550 Crossover Utility Vehicle is equipped with a powerful V-twin engine and independent four-wheel suspension. The custom artwork was designed by local graphic designer Barbra Colquitt of Colquitt Design in honor of the 95th anniversary of the Farm Credit System.

Nine Tips to Improve Your Credit Score

When you apply for a car loan, mortgage, or other financing, the loan officer tells you that they must pull your credit score. What does that mean? How is it figured? Let us explain a bit more about credit scoring and how it affects your ability to receive credit in today’s market.

There are three consumer bureaus that collect and analyze credit information on consumers: TransUnion, Experian, and Equifax. The three agencies compile information on your open, closed and cancelled accounts. They also use public record to figure your credit score, including judgments, liens, and other public record items. Your score is considered a FICO® score. Each reporting agency may have a different name for the score. Scores vary from a range of 300-850. Typically the higher the score, the more likely you are to get the loan or financing request approved. Each lending institution has different cutoff scores.

Here are nine tips from FICO® to improve your credit score:

• Pay your bills on time.

• If you have missed payments, get current and stay current.

• Be aware that paying off a collection account, or closing an account on which you previously missed a payment, will not remove it from your credit report.

• If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.

• Keep balances low on credit cards and other revolving credit.

• Pay off debt rather than moving it around.

• Don’t close unused credit cards as a short-term strategy to raise your score.

• Don’t open a number of new credit cards that you don’t need, just to increase your available credit.

• Avoid credit repair agencies that charge a fee to improve your score.

Are you now curious about your credit? Visit www.annualcreditreport.com for your free report today! To receive a free “Understanding Your FICO Score” guide, drop us an email at info@mafc.com.

Top 3 Tips for Obtaining a Farm Loan

Some folks say that it’s impossible to start farming now. And even if you could find a great property, it's hard to find a lender who is willing to talk to you. While that is probably true at times, thankfully, you've arrived at the one lender who is always willing to talk to you. After all, "farm" is our middle name!

 

Here are our 3 top tips for obtaining a farm loan:

 

#1 Create a great credit history.
You may not have had a farm loan before, but that doesn’t mean that you don’t have a credit history. Your credit record includes your credit card information (how much credit you have available on each of them, if you have an outstanding balance, if any of your payments have been late), and other loan information (such as car loans, student loans, or any other mortgages).

If you don’t have a credit history, there are other ways to create one, like getting information from past landlords or service vendors, such as gas and electric companies or telephone companies.

One of the most important parts of a great credit history - always, always, always pay your bills on time. Statistically, it has been proven that if you pay your current loans as you agreed to, you are more likely to pay future loans as agreed to as well. And that’s good news for any lender.

 

#2 Have a plan.
You must have a plan for success. Create a business plan, whether it’s in writing or something you can talk about. This is a blueprint for establishing and then meeting your goals. The plan should include what you want to do, how much money you’ll need, and what ways you’ll repay the money.
If you have never written a business plan, never fear. You can find information about doing them from your local cooperative extension office.

 

#3 Ask about special financing programs.
When you talk with a lender about financing, be sure to ask about any special programs or partnership opportunities. We aren’t just lending you money; we want you to look at all funding options to help you succeed. Here are a couple of programs to keep in mind:

• StartRight – this is a MidAtlantic Farm Credit program geared specifically for young, beginning, small and minority farmers. We have low interest term, operating and best management practice loans. You can find more information about this program here.
• Farm Service Agency – offering guaranteed and direct loans to qualifying borrowers.
• Federal or State Funding – USDA and NRCS has several grant programs available.  Small Business Administration – the 504 Loan program is a financing program for expanding farms

It seems like a lot to think about, but don’t worry. You don’t have to be the expert in farm loan financing – that’s our job. You enjoy being the expert in your farm business.

MidAtlantic Farm Credit Hires Crop Insurance Representative in Pennsylvania

Kathi Levan, crop insurance manager, has announced the hiring of Jordan Risser as a crop insurance sales representative for MidAtlantic Farm Credit’s Penn region. According to Levan, Risser’s responsibility will be business development and acquiring new crop insurance customers throughout the 15 county territory in southeastern Pennsylvania which makes up the Penn Region.

“The crop insurance industry overall is undergoing considerable changes because of current political and economic realities,” Levan noted. Many farmers and the crop insurance agencies that serve them are finding that keeping up with product changes and complying with new regulations is a complex task.”

MidAtlantic Farm Credit focuses solely on providing agricultural credit to farmers, rural landowners and agribusiness and our insurance agents specialize only in crop insurance products,” she adds. “Because of that, we are able to maintain a high level of expertise and demand for our services is increasing. By having Jordan join our team we will be able to exceed producer needs for risk management advice.”

Jordan grew up on his family’s dairy farm in Lancaster County and comes to Farm Credit with a crop insurance background. “His background in farming and knowledge of crop insurance will be a real asset to current customers as well as developing new business relationships,” Levan says.

Jordan resides in Elizabethtown, PA with his wife and enjoys farming, hunting and camping in his spare time. He is a graduate of Delaware Valley College where he obtained a degree in Agronomy.

About MidAtlantic Farm Credit

MidAtlantic Farm Credit is one of the largest agricultural lenders on the east coast providing credit and crop insurance in Delaware, Maryland, Pennsylvania, Virginia and West Virginia. They are part of the national Farm Credit System, a cooperative lender with more than 500,000 borrowers and a portfolio of over $160 billion.

What's in Your Rate? (Part 2)

Yesterday we shared 13 of the 26 factors that affect your rate. Today, we're sharing the other 13! So, here goes:

1. Co-borrowers – will there be other people on the loan, and if so, what does their credit look like? All parties involved in the loan will be used in determining the rate.

2. Debt Ratio – how much money is made monthly versus the cost of monthly bills. The typical ratio that lenders looks at is 42%.

3. Housing Ratio – what does the ratio from above look like when you add in the cost of the mortgage? Usually a good housing ratio is 28%.

4. Improvements Needed – this will affect the value of the property. Remember from yesterday's post that the lower the percentage of the loan amount to the value of the property, typically the better the rate.

5. Employment Type – self-employed, hourly employed, bonus-based pay – these all affect the risk factors of whether you’ll be able to pay back the loan.

6. Employment History – this also affects the risk to the lender. If you show a consistent history of employment, the better chance for a lower rate.

7. Documentation Available – are you able to produce all documentation (bank statements, taxes, retirement accounts, etc.) to show your assets? This will help ease the risk factors for a lender and help lower the rate.

8. Relocation – are you being temporarily or permanently relocated by an employee? That will determine if the house is considered a secondary (higher rate) or primary residence (lower rate).

9. Seller Contributions – if the seller is able to contribute money towards closing costs, that will increase the amount you have available for a down payment.

10. Gifts – again, lowering the amount of loan you’ll need with gifts from family members will help to lower the interest rate. 11. Cash-out – if you refinance and want to walk away from closing with money in your pocket, you may be increasing the percentage of loan to property value.

We hope this information is useful to you! If you have other burning questions you'd like us to answer, post a comment here or send us an email at info@mafc.com.