By Roy Martin, VP Relationship Manager, Conterra Ag
Whether they are dairymen, crop farmers, livestock producers or agribusiness operations, most borrowers go to their bank once a year to renew their operating lines for the upcoming season. Most years this process comes off without any major hitches. But what happens if they experienced losses for the past season or maybe a couple of seasons? Now the process becomes more difficult. The bank who is providing operating financing is now unwilling to move forward without some serious changes being made. They will be looking to equity in real estate or elsewhere to shore up these losses and facilitate the annual renewal of the operating loan.
Many times, the bank can handle this internally, but what happens when they can’t or won’t extend this much needed credit? Or even worse, what happens if the borrower is moved into the bank’s so called “Special Assets” division? Even though this an uncomfortable move for all borrowers, it is not always the end of the road.
Those of us who have been involved in and understand agriculture all of our professional careers, are well aware of the cycles involved with most major commodities. Sometimes losses are inevitable due to low prices, severe weather events, government regulations, etc. and are no fault of the borrower.
This is where Conterra Ag Capital can help. We look at each loan request individually and determine the best course of action. Obviously, good, strong credits are what all lenders are looking for and competing to get. Conterra is no different in that respect, as we want those customers as well. Where we do differ, is we have a loan product available to us that can help those who are not “A” rated credits. We call this our “Alternative Loan Program”.
This program is designed specifically to help borrowers get back on their feet after some tough times. Does everyone qualify? – certainly not, but if positive strides have been made in turning the operation around and show that negative cash flow is turning positive in the near future, with an ability to service debt, an alternative loan may be the answer.
It may be yields are improving with recent maturing permanent plantings, market prices are on the up cycle, a property has been sold to clean up the balance sheet by eliminating some debt or a host of other responses. Whatever the reason, Conterra has the ability to quickly analyze the situation and help determine what path to take going forward.
The structure is generally a 1-to-3-year bridge loan with interest only payments. Over the years we have helped many borrowers get out of that dreaded “Special Assets” situation and soon back into conventional financing. Even bankruptcy is not always a deterrent if an approved exit plan from the court is available.
Even though these bumps in the road may seem fatal, that is not always the case. If any of this sounds familiar let Conterra take a look at your situation to see if we can qualify you for this Alternative Loan Program. If you are not in this distressed situation, we would gladly entertain your request as well.
Conterra Ag is a national lender, focused solely on agriculture and agribusiness. California relationship managers, Roy Martin and Jerred Davis have been around farms and ranches their entire lives. They bring their knowledge and experience to their clients providing an understanding of the cycles of agriculture and ag finance.
If you’re ready to refinance or make your next land purchase and have questions, start the process by contacting a Conterra Ag Capital relationship manager today: Roy.Martin@ConterraAg.com or Jerred.Davis@ConterraAg.com
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