What Agricultural Lenders Look for in a Balance Sheet

A banker reads a balance sheet the way I read the sky — he's lookin' for the trouble spots before they've drifted by. And just like I trust thunderheads to tell me when to run, he trusts a page of numbers... so you'd better give him one.

The Balance Sheet is one of the first documents many agricultural lenders reach for. It shows what the operation owns, what it owes, and the net worth left over at a specific point in time.

Core Sections Lenders Examine

• Current assets: cash, grain inventory, receivables, prepaid expenses.
• Intermediate assets: machinery, equipment, breeding livestock.
• Long-term assets: land, buildings, improvements.
• Current liabilities: operating notes, accounts payable, current portion of term debt.
• Intermediate and long-term liabilities: equipment loans, real-estate mortgages.
• Net Worth / Owner Equity: total assets minus total liabilities.

What Raises Concerns

• Missing or outdated equipment lists.
• Asset values that appear arbitrary.
• Large discrepancies between tax depreciation records and reported values.
• Incomplete debt information.
• Statements that don't reconcile with prior years or tax returns.

How to Strengthen Your Balance Sheet

• Start with a complete list of depreciable assets — Form 4562 is an excellent source.
• Use consistent valuation methods and note whether values are tax basis, book, or market.
• Keep debt schedules current.
• Update the statement regularly instead of only when a loan is needed.
• Make sure the Balance Sheet ties logically to your P&L and Cash Flow.