Oregon Department of Agriculture

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1 TEXT SIZE: A+ A- A TEXT ONLY TRANSLATE Find Oregon Department of Agriculture ODA home About Us Contact Us Newsroom News releases and stories of the week Agriculture Quarterly Reports, speeches, videos Public records request Request popular ODA publications Subscribe to ODA news and information About Oregon agriculture Calendar of Public meetings Commodity Commissions Director's webpage FAQs Farm Mediation Sources of Ag Credit Introduction Preparing a loan application Enterprise Cascadia Farm Credit Services Farm Service Agency Harvest Capital Company Oregon Bankers Association Pacific Intermountain Mortgage Company (PIMC) Prudential Agriculture Investment Office Rabo AgriFinance Links Introduction This publication provides a brief overview of various institutional credit sources, their respective eligibility and loan approval criteria, and contact information. Interested borrowers should follow up with lenders to obtain more details. The first section Preparing a loan application, contains common information that creditors will request when a loan application is made. The prospective borrower is encouraged to prepare and evaluate financial statements before filing an application. This can help identify strengths and weakness of the proposal and options to discuss with lenders. Non-commercial sources of credit may also be an option for the prospective borrower. Private transactions, such as land sales contracts, are quite common in Oregon. Additionally, dealers of farm inputs such as seed, fertilizer, ag chemicals, and farm machinery often carry lines of credit or financing terms for these products. However, this publication does not provide specific information about these alternatives. You may want to check directly with such dealers about credit availability. Grants and financial New and small farms Oregon ag laws Risk Management Sustainability Energy and ag Search the ODA website Search for jobs Search for licenses Search ODA databases Search for agricultural resources Preparing a loan application All lenders will request credit information when you apply for a loan for agricultural purposes. The forms you are required to complete may vary in appearance and format, but the basic information will be the same. Following, are some general guidelines to help you evaluate your loan proposal. By knowing what a lender is looking for, you may be better prepared to discuss your needs and the strengths of your request. Lenders generally review two categories of information: 1. the credit-worthiness of the borrower 2. the financial information associated with the loan. Each of these areas contain several components, some of which are briefly described below. Credit-worthiness An evaluation of credit-worthiness includes a review of your credit history, repayment record, experience and training, etc. Generally, lenders will obtain a credit report from a credit reporting agency to review your credit history. You may want to obtain such a report for your own use to verify the information. Errors are not uncommon and many people have found they cannot get loans because of an erroneous credit report. The following credit reporting companies can provide you a copy of your report. Usually a fee of about $30.00 is required. Experìan

2 First American CREDCO NACM-Oregon, Inc Financial information Depending on the purpose of the loan (operating, farm purchase, capital improvement, expansion, etc.), lenders may require different financial statements about the operation. The two most common financial statements required by lenders are the balance sheet and the income statement. Some lenders also require a cash flow statement, particularly if the loan is for operating purposes. These documents can be obtained from most any lender, and many variations exist. It is strongly suggested that the prospective borrower complete and evaluate financial forms before making a loan application. Any USDA Farm Service Agency (FSA) office will have financial forms which might be used (the Farm and Home Plan form), whether or not you are a borrower of FSA. These forms are generally more detailed than those used by commercial lenders. However, they provide a good format to evaluate the operation and the loan request. Any Farm Credit Service office or local bank will also have their respective financial forms. Other sources of financial forms include County Extension Offices, Oregon State University Department of Agricultural and Resource Economics, , Chemeketa Community College Farm Business Management Program in Salem, , and Blue Mountain Community College Farm Management Program in Pendleton, The balance sheet A balance sheet lists the assets and liabilities of the farm and the owner/operator. It documents the net worth (difference between assets and liabilities), and provides information to calculate various ratios measuring the solvency (or long-term financial strength) of the operation, and the liquidity (or shortterm financial status) of the operation. Debt-to-asset ratio Once debts and assets have been totaled, the debt-to-asset ratio can be computed. This measures the amount of total debt compared to total assets. Lenders prefer this ratio to be less than.45, meaning the operation should have no more than 45 percent debt compared to total assets. Debt-to-asset ratio = total debts total assets Preferred ratio = less than.45 Other ratios that lenders will evaluate include the liquidity ratio, the cash flow margin, and debt service coverage. Liquidity ratio The liquidity ratio is calculated by dividing current assets by current debts. This measures the ability of the operation to meet debts which are payable in the near future. Lenders prefer this ratio to be no less than In other words, at least a 25 percent margin should exist between short-term obligations (accounts payable, accrued interest and notes payable within 12 months, taxes, etc.) and the value of short-term assets, such as cash-on-hand, savings accounts, crops and feed or livestock held for sale. Liquidity ratio = short-term assets short-term debts Preferred ratio = 1.25 or higher The next ratio requires the preparation of a cash flow statement. Lenders prefer that a monthly cash flow statement be prepared for at least one year. This statement shows the expected cash outflows and inflows throughout the coming year, detailing when additional moneys may be needed, and when surplus income will be available to repay debt. Lenders are looking to see if the projected operation can support all necessary operating costs, living expenses (unless these are provided by an outside job or other source), and repay borrowed funds on a timely basis. Cash flow margin The cash flow margin is computed by subtracting monthly (or annual) cash expenses from gross cash income, then dividing by monthly (or annual) expenses. Lenders prefer a 15 to 25 percent margin. In other words, monthly (or annual) cash income should exceed cash expenses, including interest payments on debt, by 15 to 25 percent. Cash flow margin = [gross cash income - cash expenses (including interest)] total cash expenses Debt service coverage ratio The debt service coverage ratio is computed after completing an income statement. This ratio shows the income generating ability of the operation toward servicing the total debt. The calculation uses net cash farm income (plus interest) divided by debt payments (principal and interest). Lenders prefer this ratio to be 1.15:1 to 1:25:1. Debt service coverage = [net cash farm income + interest] interest and principal payments. Net cash farm income = net farm income, plus depreciation and net off-farm income, less living expenses and income taxes. This discussion of lender qualifications for agricultural loans has covered only a few of the items which lenders evaluate. Other considerations include the experience and management skills of the operator/borrower, the value of property to be purchased, market conditions, and other subjective factors.

3 However, by completing financial forms ahead of time, evaluating the strengths and weaknesses of the application, and keeping good records the prospective borrower will enhance the probability of obtaining a loan and better understand the decision process of the lender. Enterprise Cascadia Contact Information: info@sbpac.com - general information and inquiries Astoria, OR th Street, Suite 501 Astoria OR Phone: Portland, OR 1000 SW Broadway, Suite 1000 Portland, OR Phone: Description Microloans from $5,000 to $50,000, for a variety of purposes including business start-up. Enterprise Cascadia lends throughout Oregon and Washington with focal points around our current offices in Astoria, Ilwaco, Port Angeles, Portland, Seattle, and Shelton. We specialize in transactions that traditional banks could not accomplish alone and look for opportunities to invest our resources in businesses and activities that will promote family, environmental and/or economic resilience. Areas of service: Pacific Northwest Farm Credit Services 650 Hawthorne Avenue, S.E., Suite 210 P.O. Box Salem, OR Phone , or Fax Web mhatley@farm-credit.com Description Farm Credit Services is a cooperative lending institution established by the U.S. Congress in 1916 to make credit more available to the country s farmers and ranchers. Borrowers are required to invest in capital stock as a requirement for the loan. All types of loans are offered to full-time farming and ranching operations (other lending programs are available to part-time farms and rural residents). Type of loan: Operating loan Varies; depends on terms, loan quality, market conditions Approval Criteria: We consider all credit factors and their relationship when evaluating a loan request, including cash flow, liquidity and solvency positions, usage of funds, experience of the borrower, credit history, and repayment ability. Type of loan: Revolving Line of Credit Varies; depends on terms, loan quality, market conditions Approval Criteria: Same as above. Requires exemplary credit factors to qualify; credit line up to 36 months; repayment restores the available commitment. Type of loan: Intermediate-term loans Varies; depends on terms, loan quality, market conditions Approval Criteria: Same as above. Equipment, livestock, and related loans with terms from 1 to 10 years. Fixed or variable rates. Leasing programs are also offered on equipment.

4 Type of loan: Real estate loans Varies; depends on terms, loan quality, market conditions Approval Criteria: Same as above year terms; requires first lien on eligible real property as Collateral. Fixed rate and adjustable rate programs are available. Farm Service Agency 7620 SW Mohawk Street Tualatin, OR Phone , Ext. 256 Fax Microloan program USDA announces microloan program available through Farm Service Agency In January 2013, Agriculture Secretary Tom Vilsack announced a new microloan program from the U.S. Department of Agriculture (USDA) designed to help small and family operations, beginning and socially disadvantaged farmers secure loans under $35,000. The new microloan program is aimed at bolstering the progress of producers through their start-up years by providing needed resources and helping to increase equity so that farmers may eventually graduate to commercial credit and expand their operations. The microloan program will also provide a less burdensome, more simplified application process in comparison to traditional farm loans. Producers can apply for a maximum of $35,000 to pay for initial start-up expenses such as hoop houses to extend the growing season, essential tools, irrigation, delivery vehicles, and annual expenses such as seed, fertilizer, utilities, land rents, marketing, and distribution expenses. As their financing needs increase, applicants can apply for an operating loan up to the maximum amount of $300,000 or obtain financing from a commercial lender under FSA s Guaranteed Loan Program. USDA farm loans can be used to purchase land, livestock, equipment, feed, seed, and supplies, or be to construct buildings or make farm improvements. Small farmers often rely on credit cards or personal loans, which carry high interest rates and have less flexible payment schedules, to finance their operations. Expanding access to credit, USDA s microloan will provide a simple and flexible loan process for small operations. Producers interested in applying for a microloan may contact their local Farm Service Agency office. More information is available about the program at the Farm Service Agency Loan Programs page. Operating loans (OL) No minimum, $200,000 maximum ~3.875% subject to change Up to 100% of FSA appraised value To be eligible an applicant must be a US citizen, have an acceptable credit history, have sufficent farming experience, be unable to get credit from other sources, not delinquent on any federal debt, have not caused forgiveness of regular agency debt, and is limited to family sized farming operations. There must be adequate security and a feasible plan of operation must be developed based on proven records. Note: Direct loans are available only if guaranteed loans are not. Type of loan: Farm ownership (FO) No minimum, $200,000 maximum ~5.50% subject to change Up to 100% of FSA appraised value Same as a regular OL loan, but the applicant must have significantly participated in the business operations of a farm or ranch for at least three years. Note: Funding for direct FO loans is limited. Direct loans are only available if guaranteed loans are not. Type of loan: Beginning farmer down payment (FO) loan

5 : No minimum, $100,000 maximum ~4.00% Up to 40% of purchase price or appraised value, whichever is less. Same as a regular FO loan, but the applicant must have significantly participated in the business operations of a farm or ranch for at least three years and less than 10 years, and does own a farm or ranch larger than 30% of the averaged sized farm or ranch in the County. Applicant is required to make a 10% cash down payment. Loan amount cannot exceed 40% of the purchase price, supject to a maximum purchased price of $250,000. Maximum loan terms are 10 years. the remaining 60% of the purchase price can be financed through a guaranteed FO loan, nonguaranteed loan, or seller financing. Type of loan: Guaranteed loan No minimum, $813,000 maximum (adjusted annually) Set by the loan to value ratio Set by the loan description Must meet criteria set by originating lender (bank, credit union, Farm Credit Services, etc.); meet FSA eligibility requirements, have adequate security, and have a feasible plan of operation. Type of loan: Interest assistance program No minimum, $813,000 maximum (adjusted annually) Type of loan: Beginning farmer & rancher land contract guarantee pilot program No minimum, $500,000 maximum purchase price Rate on the land sales contract cannot exceed more than 3% above the established direct FO rate (~5.50%, subject to change). To be eligible the buyer must meet the general eligibility requirements for a direct FO loan, meet the requirements for a beginning farmer (substantially participated in the business operations of a farm for at least 3 years but less than 10 years), buyer must provide a 5% down payment, and contract payments based on 20 year repayment terms. Harvest Capital Company PO Box NW 2nd Ave., Suite 7 Canby, OR Phone Fax Web admin@harvcap.com Description Harvest Capital Company functions as originators and direct correspondent lenders for many types of agricultural and agribusiness real estate and facility loans. As an accredited Originator and Servicer in the Farmer Mac Loan Program and as direct correspondents for life insurance companies, we have the ability to service any size long-term agricultural mortgage loan request that meets the above criteria. Our lending expertise extends not only to ag long-term debt and working capital lines of credit, but also to private placement of complicated agribusiness term-loans. For additional information, please contact Harvest Capital Company. Areas of service Oregon, Idaho, Washington, Montana Type of loan: Ranch real estate Varies, depending on terms, loan quality, etc. 70% maximum with most loans at 50% loan-to-value Debt to asset ratio 50% or less Overall debt coverage ratio 1.25:1 or better

6 15-20 year amortization depending upon type of security and borrower s needs. Current ratio 1:25 to 1 minimum Debt coverage 1:1 to 1.25:1 or better Type of loan: Farm real estate $250,000/no maximum Varies, depending on terms, loan quality, etc. 70% maximum with most loans at 50% loan-to-value Debt to asset ratio 50% or less Overall debt coverage ratio 1.25:1 or better year amortization depending upon type of security and borrower s needs. Current ratio 1:25 to 1 minimum Debt coverage 1:1 to 1.25:1 or better Type of loan: Agribusiness processing real estate Varies, depending on terms, loan quality, etc. 70% maximum with most loans at 50% loan-to-value Debt to asset ratio 50% or less Overall debt coverage ratio1.25:1 or better year amortization depending upon type of security and borrower s needs. Current ratio 1:25 to 1 minimum Debt coverage 1:1 to 1.25:1 or better Oregon Bankers Association th Street SE, Suite 130 Salem, OR Phone Fax Web tperrick@oregonbankers.com Description Commercial banks predominantly focus farm lending toward production/operating loans and equipment or intermediate loans. Each bank has its own set of approval criteria and application forms.some commercial banks in Oregon provide agricultural credit. Individuals interested in discussing ag credit requests should contact their local bank. Offices Willamette Community Bank PO Box 927 Albany, OR Phone Bank of Astoria PO Box 28 Astoria, OR Phone Pinnacle Bank 8880 SW Nimbus Ave., Suite D Beaverton, OR Phone Bank of the Cascades PO Box 369 Bend, OR Phone Citizens Bank

7 PO Box 30 Corvallis, OR Phone Liberty Bank PO Box Eugene, OR Phone Pacific Continental Bank PO Box Eugene, OR Phone Oregon Pacific Banking Company PO Box Florence, OR Phone Siuslaw Bank PO Box 280 Florence, OR Phone Home Valley Bank PO Box 817 Grants Pass, OR Phone MBank PO Box 504 Gresham, OR Phone Bank of Eastern Oregon PO Box 39 Heppner, OR Phone Banner Bank PO Box 1185 Hermiston, OR Phone Columbia Community Bank PO Box 725 Hillsboro, OR Phone Community Bank PO Box X Joseph, OR Phone South Valley Bank & Trust PO Box 5210 Klamath Falls, OR Phone West Coast Bank 5335 SW Meadows Rd., Suite 201 Lake Oswego, OR Phone People s Bank of Commerce 750 Biddle Road Medford, OR Phone Premier West Bank PO Box 40 Medford, OR Phone Oregon Coast Bank PO Box 2280 Newport, OR Phone Albina Community Bank 2002 NE Martin Luther King Jr. Blvd. Portland, OR Phone American Pacific Bank 315 SW 5th Ave. Portland, OR Phone Bank of America 121 SW Morrison, Suite 1700 Portland, OR Phone Bank of Tokyo-Mitsubishi, Ltd.

8 1211 SW 5th Ave., Suite 2300 Portland, OR Phone Capital Pacific Bank 805 SW Broadway, Suite780 Portland, OR Phone Keybank, NA 1211 SW 5th Ave., Suite 300 Portland, OR Phone Town Center Bank SE 82nd Ave. Portland, OR Phone Umpqua Bank 200 SW Market St., Suite 1900 Portland, OR Phone Union Bank of California 601 SW 2nd Ave., Suite 1800 Portland, OR Phone US Bank PO Box 4412 Portland, OR Phone US Trust Co., NA 4380 SW Macadam Ave., Suite 450 Portland, OR Phone Washington Mutual 851 SW 6th Ave., Suite 230 Portland, OR Phone Wells Fargo Bank PO Box 3131 Portland, OR Phone West Coast Trust Co SW Broadway, Suite 1100 Portland, OR Phone Community First Bank PO Box 447 Prineville, OR Phone Bank of Salem PO Box 847 Salem, OR Phone Pioneer Trust Bank PO Box 2305 Salem, OR Phone Willamette Valley Bank PO Box 2747 Salem, OR Phone Clackamas County Bank PO Box 38 Sandy, OR Phone Silver Falls Bank PO Box 99 Silverton, OR Phone Columbia River Bank 401 E 3rd St., Suite 200 The Dalles, OR Phone Mid-Valley Bank PO Box 583 Woodburn, OR Phone

9 Pacific Intermountain Mortgage Company (PIMC) 2420 Main St, Baker City, OR Telephone: or Fax: Description of loan services Provides long-term real estate loans to farmers and ranchers. Originates and services loans for the Farmer Mac I programs and the FSA guaranteed loan programs. PIMC is the contract agent for Old West Federal Credit Union, and the Malheur Federal Credit Union. Both are approved for the FSA Preferred Lender Program. Loan purposes Purchase real estate, refinance debt, and land or building improvements. Areas of service Operates primarily in Eastern Oregon, Southwest Idaho, Nevada, and Eastern Washington State. Type of loan Long-term real estate loans. No minimum amount. Maximums vary, but can be up to $5,000,000 for the Farmer Mac I program. The maximum limit with the participation of an FSA guarantee loan is $852,000. interest Interest rates vary depending on payment, term, loan quality, and market rates published by underwriters. Ordinarily, loans will not exceed a range of 60.0 to 70.0 percent of loan to value. Any loan approved with more than this range of value, must clearly possess compensating strengths in other credit factors. Collateral Farm and ranch property. Office locations Baker City, Oregon 2420 Main St Baker City, OR Emmett, Idaho office Prudential Agriculture Investment Office 7108 North Fresno Street #400 Fresno, CA Phone Description Prudential is actively pursuing loans which meet the criteria below. Local lenders originate the loans, depending on the size, then sell the loans to Prudential. In most cases, the local lender continues to service the loan and receive payments. Prospective borrowers may contact Prudential at the phone/address above to obtain a list of participating lenders. Areas of service Willamette Valley (Portland to Eugene) and Hood River area (north central Oregon). Type of loan: Farm property $500,000 up Varies, depending on terms, loan quality, etc. 70 percent maximum Debt to asset ratio 50 percent maximum Overall debt coverage ratio 1.25:1 or better

10 Current ratio 1:1 or better Debt coverage 1:1 or 1.25 or better Rabo AgriFinance Real estate and operating loans 660 Hawthorne Ave., SE, Suite 150 Salem OR Ken Hibbard, Relationship Manager Jennifer McCarthy, Relationship Manager Garey D. Fritz Sr. Relationship Manager/ VP 660 Hawthorne Ave SE, Suite 150 Salem, OR Office Direct Cell garey.fritz@raboag.com Links Grants and financial resources OREGON.GOV State Directories Agencies A to Z Oregon Administrative Rules Oregon Revised Statutes About Oregon.gov WEB SITE LINKS Text Only Site Accessibility Oregon.gov File Formats Privacy Policy Site Map Web Site Feedback PDF FILE ACCESSIBILITY Adobe Reader, or equivalent, is required to view PDF files. Click the "Get Adobe Reader" image to get a free download of the reader from Adobe.