Preparing to Work with your Lender
Print
EmailFebruary 15, 2021
Video Transcript
- [Jon] Well, good morning, I wanna thank everyone for coming out to this session of the "Michigan Ag Ideas To Grow With" conference. Real quick here, we wanna just spend a moment to, again, thank our sponsors for helpin' out with this conference. Because of their generous support, we have been able to offer this at free of charge to participants. We have also been able to offer a scholarship opportunity for college students or hopeful college students. That can actually be obtained at the website listed here on the screen. And I will actually share that in the chat for everyone as well. And we also wanna spend a moment here to kinda highlight a short video on Farm Stress from our colleague, Eric Karbowski. One of the things Eric wanted us to make sure we mentioned was that caring for animals and crops creates a unique stress, and a lot of pressure that can be hard on farmers and agribusiness professionals. Caring for one's own health and wellness in this high-stress profession that we're all in is often overlooked, but it's just as critical as caring for the farm business. And so whether those stresses come from a financial issue or the stresses of everyday life, MSU Extension wants to help. And with that, we'll actually switch over to looking at the video from Eric. Well, I apologize, it appears we're having some technical difficulties here with the video here from Eric. So we'll go ahead and actually get into the presentation for the day. Okay, so again, wanna just thank everyone again for coming out for this morning session. This is the "Preparing To Work With Your Lender" session. My name is Jon LaPorte. I am the Farm Business Management Educator here in the Southwest part of Michigan. Joining me today as a co-speaker is Dr. Corey Clark. Corey, would you like to say a few words to introduce yourself? - [Corey] Sure, I'm Corey Clark. I am the Farm Business Management Educator in the Thumb. I am the Jon of the Thumb. - [Jon] And very appreciative to have you. Heavy weather this morning. So as we get started, we kinda wanna just gauge everyone a little bit to see who's kinda in our audience and some takeaway here, kinda see where everyone's at this morning. So we're gonna ask a couple poll questions here. You should see a poll springing up on your screen. But the questions are, how confident do you feel about working through the lending process with your lender? And then also, how much time do you spend reviewing your financial documents or history prior to meeting with the lender? I'll give everyone just about a minute here to try to participate, see if we can kinda get most of the folks that are on today, if they could just take a moment to read the questions, look through the answers here and give us your thoughts. We're sittin' at about 60%. If we could get maybe a couple more here to just boost it up here, and then we'll kinda move on to the rest of our content. Okay, and the poll here. All right, so as we talked about getting to working with and preparing to work with your lender, the first question that really important, I think, to start asking for everybody is, what does the lender want to see? And the first thing to kinda keep in mind is that the lender really wants to see that the farm manager, you, if you're the farm manager for your farm, is leaving that financial conversation. They really wanna spend some time discussing the plan, not just the problems, to being successful. They wanna see you in the driver's seat and talking about what it is that the farm is looking to achieve overall. Now, the problems are important because those are roadblocks that the lender can help with, but they're wanting to kind of hear that overall plan and what it is the farm's looking to do step-by-step, and then how they can help along the way, not just necessarily in the immediate ask that you're maybe there visiting with them about. The lender also wants to be treated as a trusted partner, just like someone that's on your management team. Because in reality, they can be every bit as important as other members of your management team, and become a part of that team over the long-term. And so as you think about other members of your team, maybe it's a nutritionist that you work with, your agronomist, you wanna really think about preparing for them like you would those other team members. And so as you think about that, if you're comparing to your nutritionist or your agronomist, and thinking of the lender in the same light, what do they need to know to help the farm to succeed? Now, of course, the first thing that lender has to first do is they need to invest in the farm business to do that. And so to help them with that, it's important to understand what the lender needs in order to make that initial investment to kinda get this process started. So really we're talking about understanding the lender's perspective. And so that starts with what are the concerns that the lender has. So as we think about that, there's kind of five areas that I wanna make sure we cover this morning. The first is management experience. We'll talk a little bit about collateral; the typical year projection versus the history for the farm; a little bit of time on risk management; and then kind of finishing up with the comparison of small versus large loans and what concerns the lender maybe has for those. So let's get right into farm management experience. And really what we're asking is, are you the one making the management decisions on the farm? And when we think about management decisions, we're talking about those decisions that impact the potential success or failure of the farm business. And so some classic examples of that are the person that's locking in the market prices with contracts, who's purchasing inputs for the year, or who's making changes to the plans for what's going to be planted or maybe the rotation of planting or even the feed nutrition plan for the livestock on the farm. Whoever's making that decision is making the management decisions for the operation. Now, this is different than the labor decisions, which are not management decisions. And then when I talk about labor decisions, I'm referring to time spent driving on the tractor or working with the livestock and maybe the feedlot. And while those are important, they offer a lot of valuable information that comes to production activities that ultimately influence the management decisions on the farm. There's a lot of valuable things that can be learned from those. I've spent a lot of time driving a tractor myself and learned quite a bit about the production activities, and how the things we do on the farm impact the overall production. But while that's valuable, if you're not the one making the tough decisions, the tough calls on the farm, and the one that's really impacting those potential success of that business, then it's not really considered management experience. It's good experience, but we wanna focus back on who's making those tough calls. And while this is not always asked for on the application, it is always part of any kind of lender review, because that's part of making sure that the lender is comfortable making the loan that the person applying has that experience to manage a farm well. And so you wanna plan to talk about your experiences making those decisions. You wanna be able to share experiences. Don't go in with a rehearsed answer, by any means, but definitely have some examples that you'd like to share to kind of highlight some of those tough calls that you had to make over time. And be prepared for questions. The lender is gonna have questions, certain things they wanna know. They've got experience working with farms, certain things they would like to talk about. And don't be afraid to share the failures that you've had, because those are just as important as the successes. And so as we think about things that haven't gone well on the farm, what did you learn from that? How did you make those changes? And did those changes lead to success, either that initial change or maybe that initial change led to some other changes that eventually got you to that point of success. All of that is really helpful information for the lender to know, and to be able to get a better understanding of your ability as a farm manager. This is also something that I wanna encourage people to think about getting the next generation involved in when it comes to making these decisions. Now, of course, you wanna do that with some supervision. You wanna make sure that they understand what it is you're trying to achieve as you work through some of these decision-making processes, but you wanna get them involved early and get them into thinking about how it is that they're gonna have to work through making decision themselves one day when they actually are running either that same farm operation or one of their own. And this is often what I consider the number one roadblock to a successful loan experience for beginning farmers. They walk in the door and one of the first question the lender's gonna have is, what kind of experience do they have making these tough decisions? And so I really encourage folks to get those, that next generation involved a little bit early. Let's also turn now to looking a little bit at collateral. And from a collateral standpoint, we're talking the lender wants security in case of a worst-case scenario. If you can't pay the loan back, will they get their money back in the long run? And so what they do is they'll take liens on assets to gain security. For those folks who are maybe in the audience that aren't familiar with a lien, it's a legal claim over an asset until that debt obligation is paid or satisfied. And so the lender's gonna take liens on different assets to get that security. And the type of security needed really depends on the loan. If you're looking for an operating loan, they're typically gonna want your commodity sales. And they may add in chattels, which is your livestock or your equipment. Basically, if you're looking at a balance sheet, your intermediate assets to kinda offer additional security if you have to look at a longer-term situation. If you're talking about actually purchasing livestock or equipment, that's the type of security they're often gonna look for. And they can do that either with a lien on individual items or all of the items that fall under that chattel designation that they call a blanket lien. Now, if you're looking for land or buildings, the collateral that they're gonna look for is gonna be land, plus or minus everything else. They may take a blanket lien on other farm assets just because of the security situation, and how much land you have available to offer. The thing to keep in mind when it comes to collateral and specifically liens is, if you have a lot of liens on your assets, it's gonna be difficult for a lender, especially new lenders, to feel secure about investing in the operation. So this means that we also need to think about the fact that lender lien positions on the assets are important, because it's all about securing the loan investment. If you're the primary lienholder, that person's gonna be the most secure with the least amount of risk. If they're the second lienholder, they have more risk and a little bit less secure. Now, if you're the lienholder that's in the third position or the fourth position, this is the highest amount of risk and there's very little security. Ultimately, lenders want the best lien or the best security position. And sometimes what you're gonna find is that they're gonna ask you to maybe look into a subordination to be able to gain this desired lien. And this is basically asking the other lienholder to switch positions. So if you've got a lender that's maybe got a first position lien, you're asking them to switch into a second position, and so now you've got two lenders that you have to be concerned about what their concern levels are. And for this second lender, the first lienholder, their new concern is, if the farm must sell assets, will the lender get repaid if they're not in first place any more? And so it's very important to understand what you're asking of the lender if you've got a lot of liens on your assets, and then if you're working with multiple lenders, in order for them all to feel secure about continuing to invest in the farm or making that initial investment. As we think about typical year projection versus the history, really what we're talking about is the lender wants to know what does your past say about your management ability? Does your history tell a positive story? Is your plan for the year reasonable compared to that history? And when we think about that, are your projected yields higher than you've achieved? So if you think about your history, we're not just talkin' about financial history; we're also talkin' about production history. And so from our yield standpoint, the bushels or the milk pounds or the sales what you're projecting, reasonable within what you've been able to achieve? Another example is, are you using prices at maybe market higha when you're not using forward contracts to actually try to lock those in. And so as you think about reasonable compared to your history, you also wanna think about, does your plan have a reasonable outcome, given industry conditions? So a example of this is, does it show a significant amount of farm profit in a period of poor prices and high input costs? Now, right now, we've got some high prices in the market, and we've got some input costs that are startin' to go higher. How does your projected plan kind of influence that? And then you start to think about how sensitive is that plan to changes in your income and/or expenses, which often we talk about from a sensitivity analysis standpoint. Ultimately, what we're getting at is, when you think about your projected plan, and you think about where it is, you wanna ask yourself, is your cash flow margin so tight, and this is an old saying I used when I worked as a lender, that if you sneeze, it could fall over into the red. So it's so, so tight that the little bit of change from a sensitivity standpoint, that you go from being profitable to being unprofitable, and how does that impact the overall cash flow and ability of the farm moving forward? And that's something the lender's concerned about when they look at that projection. I wanna also highlight that farms that have an annual financial analysis have some advantages. You've got a more complete history than if you just turned in the IRS tax returns that are typically part of your loan application. Because it fills in missing pieces that really aren't part of those tax returns, and it helps you to develop a much more accurate projection. Because you've got those missing pieces, you've got a better understanding of where the farm's actual financial health is at the time and what the financial position is. And so you develop a lot more accurate projections that really kinda tune back into your history and management experiences. And with the thought of experiences, this provides lenders with data on that decision-making. And so it actually supports your management experience by tying it to those farm records. Next, we wanna talk a little bit about risk management. And really what we're talking about is managing a farm, we understand means managing risk. And so, as you think about that, you may ask yourself, well, what risks are you concerned about? How are you managing them? And then what risks are you unable to manage and why? The thing to remember is that you wanna discuss those risks with your lender. Because discussing those actually creates a level of trust in your ability to recognize the risks and manage them; your ability to acknowledge the risks to the lender and what they're gonna be taking on with you. And, in a lot of cases, we go back to the thought of the lender being part of that management team, they may be able to help either develop or direct you to risk management tools, to some of those risk areas that you're unable to manage currently and really are unsure how to go about trying to manage them in the future. And so discussing those with the lender builds that trust and also builds an opportunity to utilize them to help in re-evaluating and moving forward to manage some risks that maybe you weren't capable of before. And lastly, I mentioned we wanna kinda talk about small versus large loans. Keep in mind that with a smaller loan, there is less risk. So that means that there's often less collateral needed and often less scrutiny and in-depth review of the financials. This is not the same as there being no review. So you still need to be prepared to talk about your experience, talk about your history, review the potential plan for the farm, the cash flow projection, and then discussing those risk management considerations. The difference is there's a smaller loan amount, so there's less risk, so there's just gonna be less of a review from that. But they're still gonna wanna know information. Now, with a larger loan, there's a lot more risk, because there's a lot more money. So that means there's gonna be a greater concern about the history and that plan for repayment moving forward. The consideration of available collateral and the lien positions is a lot greater. And then there's also greater need for that seasoned management experience to show how you can handle that investment of a large sum of money from your lender. And as I kind of wrap up here, I just wanna highlight that preparation pays off with investment because we want the lender to say yes, and that's the investment we're looking for. We want that yes from the lender. And so you wanna be able to use your management experience to showcase your decision-making on the farm. You want them to be able to understand the security offered by your debt levels and your existing liens. So understanding those yourself allows the lender to better understand what's going on with the farm. Know whether your plan is reasonable and what it says about you as a manager, and be open to discussing risks on the farm and what your management plan is, especially the areas that you're concerned about, still trying to figure out a way to manage. Build that trust level with your lender. And then recognize what the loan amount means to not only you but also to the lender, and what additional information they may need if you're talking about a large loan versus a smaller loan. Preparing for a loan request is not simple. That's kind of the main message I want folks to understand, but it can lead to a successful outcome. And as we turn over to Corey, Corey's gonna kinda walk you through some information to kinda help you actually take some of this and think through the rest of this process, and think through that financial story a little bit here. - Okay, you ready for me to share my screen? - Go for it. - Okay. Okay, we've got my presentation? - [Jon] Yep, looks good. - [Corey] Okay. Okay, so Corey Clark, as I said. And Jon talked about the lender's perspective on this on applying for a loan. I'm gonna talk more about your perspective as the person applying for the loan. And Jon has a lot of experience as the lender on that side of the table. My experience is more, and I have a lot of experience on the farmer side of the table, helping farmers develop their loan applications, and then working with them on getting those loans. So my kind of perspective on this is, your loan application is about really documenting your ability to repay the loan. Your balance sheet and your assets are ultimately gonna determine things like collateral on liens. But in terms of preparing, a lot of it is about showing your ability to repay the loan through the documents that the lender is going to see. So they're looking at your financial history, they're looking at your current situation, and they're looking at your projected results, which is that typical year projection. And they're looking at it through the lens of these financial statements. An income statement, if you do an annual financial analysis or tax returns, probably that will be either way; your balance sheet, and your cash flow projection. So before we kind of jump into all this, I wanna say that we're gonna look at this from a big picture look today. There's a lot of resources and discussion of the mechanics of building an income statement or building a balance sheet, or building a cash flow projection. And some of you have a lot of experience with getting loans and you're good at that. A lotta times, the big picture about how the relationships between production and your farm and your operations as compared to these documents, a lotta times that gets lost, and it really is what drives the numbers. So you kind of have to step back, take a deep breath and think in a way that we don't typically think about this as people in agriculture. We spend a lotta time on input prices and market prices, and those are all super-important, but so is the big picture. So we're gonna do three things. We're gonna talk about examining your financial story. We're gonna talk about developing a good plan and what the criteria is for a successful plan, and then how to communicate that plan effectively using the documents that the lender is actually going to look at. So your farm has a story, every farm has a story. There's the origin of the farm and who is on the farm, and how that happened. And there's also what you're growing, what you're raising, what you're doing as far as crops, milking cows or raising livestock or raising other products. And this is where we spend our attention, right? Operations is where we spend our time. That's what you're doing every day. And yet what you're translating to the lender is how that translates to financial performance. And we spend some time on that because you have to have records for taxes and your lender and stuff. And financial performance is that annual cycle of crops, or again, whatever you're producing, and how that generates profit and how that generates cash flow. And then this relationship, we use enterprise budgets, we use cash flow projection tools. But the other part is the financial position. And this is the balance sheet. And again, a lot of you are familiar with doing all that. This is the collateral. This represents your ability to absorb some of the risk. And this doesn't tend to get as much attention in numbers on a farm, but this tends to be something that farmers have a really good sense of. Like, if money feels tight, if the cash feels tight, usually that's a sign of low liquidity. There's not enough cash to really consistently pay the bills and feel comfortable about it. And then from a solvency standpoint or equity position, the debt feels heavy. Like, what does your debt load feel like? Has it gotten large? Is it been large? Is it getting better? Farmers have a sense of these things, but we don't tend to talk about the numbers that lenders are looking at. So we're gonna look at how this stuff that you think about gets connected to the lender and what they're looking at. So again, your financial story is how this box all relates, how your operations translates into financial performance and how your financial position changes over time. Now at any given time, we're looking at, for the lender is looking at documents that represent for an income statement, an annual, usually a calendar year. And they're looking at your balance sheet, which is a snapshot of a place in time. But your financial story is really what's happening over time and how the dots are connected, and really that's what you're managing. So your management ability or your management is representing, or is controlling this process from operations and how that's translated into financial performance and financial position. The important thing to realize is that the lender is looking at two documents. And those documents, they represent your financial story. They tell your financial story. But the lender doesn't know that whole process. They know what's on those two statements. And they're making a decision about your farm and your loan based on those two statements. The things they're looking at are profitability and cash flow margin from the income statement or the tax returns. And again, you're operating over a production year, and these statements, a lot of times, are on a calendar year. So they're seeing profitability and cash flow margin on a calendar year, which is different than what the management is, and they're looking at liquidity and solvency on your balance sheets from an actual point in time or potentially how that changes, if they have two balance sheets, how that changes over time. Okay, so let's talk a little bit about the story. So the first one was profitability. Financial performance, the first element of it is profitability, and they're looking at net farm income for the profitability and some ratios that are associated with that. And they're looking at it, like I said, from an income statement or tax returns. And then cash flow margin. The lender is looking at it, so here we have, I'm not gonna go through it. I mean, the calculation of it is long. And they're looking at this particular number, this capital debt repayment margin, and possibly some ratios associated with it, and that number is representing to them everything about your cash flow margin. And yet the way that your cash flow margin is functioning on your farm is very different. There's actually a process to that, that again, is representative to the lender in one number, but happening in all sorts of dot-connecting ways on your farm. And they're looking at, does your farm generate the capital to pay the loan back? From a farm standpoint, from a management standpoint, from what's going on on your actual farm and how those dots connect, we can divide this into two pieces. We can do the cash part. Cash revenues, cash expenses equals cash operating profit less the cash expenses and operating profit. And if we follow it all the way down, we get to the profitability, the net farm income. And from a farm standpoint, we're looking at this on a production year. So that's the accrual adjusted thing. We're looking on a production year. Despite the fact that lenders are gonna look probably on a calendar year, from a management standpoint, we're gonna adjust that and look at a production year. And we're gonna shift from looking at net farm income to looking at cash operating profit. And really, this is what we look at and we talk about on the farm. Most people, when they talk about their cost of production, are talking about the cost of production that generates zero or enough cash operating profit. Okay, so from a farm standpoint, what's happening on your farm management-wise in a production year. We have the cash operating profit, and it is generating funds for three things. It is generating funds for debt payments, it is generating funds for family living and taxes, and it is generating funds for asset investment. So the goal is if the cash operating profit from a production year is enough to pay for those three things. So when it's working, cash operating profit fills this pie. It fills family, debt, and assets. And family, debt, and assets are balanced in some way. Maybe not exactly like this, maybe not 1/3, 1/3, 1/3, probably not 1/3, 1/3, 1/3 actually. But there's some balance that matches up with your farm's goals, that matches up with what your farm needs in order to be successful. And for the record, I guess, assets includes both your term assets, your non-current assets, your equipment, your cows, those sorts of things, and it includes your working capital, which is gonna buffer this cash operating profit not working. So but if this cash operating profit doesn't work on a regular basis, it starts to get messy, as you can see from all the red arrows. So not so straightforward. In this case, if there's not enough cash operating profit to support family, debt, and assets, things start to have to pay for each other. So it might be that family provides money to the farm, or it might be that you borrow more money than you planned on to buy assets, or you borrow money in order to support the family, or the debt that you have borrowed ends up supporting the family. And when this happens over time, again, this gets messy. Debt payments start to add up and the debt requirements start to add up. The family suffers, because there's not enough cash to provide to the family. But when cash operating profit is not sufficient on a regular basis, or even a short-term basis, those holes have got to be filled. And this is the system, this is the management system that's actually underlying all of those financial statements. Again, this is what we're looking for. We're looking for cash operating profit to fill these needs because that means, on a production year, that things are going smoothly, that you're building liquidity, that you're building solvency, that you're building all these terms, all these things. Again, the mechanics are out there, resources about developing the numbers of those financial statements. But what's behind those things, what's feeding those things, is the system. And we ultimately want a plan that represents this working. Okay, so we said that the financial story was two things. It was the operations developing as it led into financial performance, and it was the operations as it led into financial position. So I wanna talk a second about financial position. The one element that they're looking for in terms of financial position is liquidity. So this is the working capital. This is what is your cash cushion. That working capital, which is represented by the current assets you've got, the cash, the inventory, the things that you could turn to cash if you needed to, in contrast to, or less the money you owe on a short-term basis, your operating loan, your accounts payable, the bills that aren't paid quite yet. If there's lots of working capital, and that system falls apart for a year, there's not enough cash operating profit in a bad year, and bad years happen, working capital buffers that. You use up some working capital, and then the next year, you go back to building up your working capital in the case that you have a bad year. So liquidity is what's the cash cushion. And then solvency is what is the equity foundation. So this is debt load, right? And it's really important for financing, and it's also important that you're building this over time to build your net worth. But this starts to be what assets are available for collateral, what are the liens, all these things that, on one side, the lender is looking at, those are represented in the numbers and the balance sheet behind your solvency or your equity foundation. So okay, let's shift gears for a second. We talked about that is your financial story. That is, at least as far as we've talked so far, what has happened over time and history. If we shift gears to a successful plan, that's just doing the same financial history going forward, or the same financial story going forward. Operations next year and the year after, and in a typical year, are gonna lead to some kind of financial performance and some kind of financial position. But again, for you as a farmer, this system is all about what you're doing every day, the stuff you grow, the stuff you harvest, the stuff you sell. And for the lender, it's represented by numbers. It's represented by that projection that is put on paper. Oftentimes that's a calendar year projection. You're managing in production years, but what you're putting on paper is a snapshot of that for a calendar year, and a lot of times in a monthly cash flow sort of format. So for the lender that says a lot, the typical year projection of financial performance, the typical year projection of financial position. But those numbers aren't the ones that are meaningful for you. The numbers that are meaningful from a management standpoint are the longer-term operations and, again, the financial story. So and that's really a solid projection, what does it reflect. It relates to the stuff Jon was talking about, and it relates to the financial story, right? Annual production is profitable. That means your net farm income is an acceptable level and sufficient cash flow to repay the loan that you're wanting to borrow. This is a big deal for like a land purchase, because land can be hard to cash flow. And these two are related. Profitability and cash flow are very related. The cash flow is really your assets, includes your assets on a regular basis, what you're putting in terms of cash into your assets. But annual production is just spreading them out with depreciation. So it's kind of two sides and two timelines for the same story. And then as Jon said, having reasonable values for the expected yields and the expected prices that reflect what's typical for your farm or what is fair to expect from your farm, and what's reasonable to expect from the industry. And then we want a plan that is resilient. It can withstand lower prices, it can withstand higher input costs, and still be supporting, the cash operating profit is still providing enough for debt repayment, for family living, and building assets, investing in your business in terms of equipment, and land and buildings, and those things that are business growth, but also still investing some in working capital, so that you're building that cash buffer. And finally, I've talked some about, quite a bit actually, about, so I'm gonna repeat what I said. To be totally honest, I'm repeating what I've said so far. Communicating your financial story, you're translating all that stuff that you manage and all of this system, again, that you're managing into the terms that the lender is looking at and evaluating you on. So they're evaluating your typical year projection, and this is what you're communicating. But you're communicating from your perspective how these things, how these loan projections, how these typical year projections are looking in front of the lender. And then, so part of this is you being able to tell your story, and part of this is you being ready to answer the lender's questions. And they're gonna reflect the questions that Jon was talking about. What is your financial story, and what is your plan? How does it reflect your management ability, is about the decisions you're making and the way that you're making operations translate into financial performance and financial position. And then, how does that story and that plan reflect your ability to repay the loan that you're hoping that you can work out with the lender? You're trying to reflect how reasonable your financial plan is. You're reflecting that your financial plan is reasonable. It's successful, but it's also reasonable. It reflects what you expect from your farm, reasonable expectations from your farm, and reasonable expectations from the industry. And finally, how you're gonna manage those risks. What risks are you planning to manage? Ideally, you're doing things like building working capital to manage price risk, yield risk, the changes in input costs. But maybe there's also some insurance involved to manage some of those risks. And what risks are you unable to manage? And those are some of the other risks of farming. Ideally, you're managing some of these annual financial risks, and you can communicate that about your plan. So I wanna take just a minute and talk about the records that are needed to really do this, because the records are really essential. In the end, all of this information is being recorded in your records, both in the past, and you're using those records from the past to make your plan for the future. And we look at records as having two labels or three levels, I'm sorry, two of which are pretty necessary in order to do the background planning of your actual financial story. The first one is the financial reporting, and that is the stuff that's required for taxes and the stuff that's required for your lender. They're gonna insist on tax returns. They're gonna insist on a balance sheet. And so level one is having the information that you need to prepare those and give them that information. Level two. though, is about management records. And that's really the information that's in the red box about your financial story for you. That's information for you as a manager. And what that really involves is tracking the cash from one year, beginning of one year or the end of one year, through to the other, the end of the other year. And then we can also adjust that for, to understand what's happening financially in the production year. But that is where you're getting every dollar from in that cash flow, cash operating profit, and where it goes. And then, like I said, if we can do that, we can also adjust for the production year and have a sense of information that's important for you as the manager. And then this enterprise analysis, this is where we divide it up by crops or by livestock versus crops. Very helpful for doing a financial plan, very helpful for understanding your business, but not absolutely necessary the way that levels one and two are. And I would be remiss if I did not mention that Extension does support some of this stuff. TelFarm is a fee-based, individual service type program. The idea is to work individually with farm business owners and managers to support accounting, tax planning, and then financial analysis, and do that every year and be available basically all the time. (coughs) Sorry, the Farm Business Benchmarking Program is available, this is free. There's not a cost associated with this. We basically get to level two records for the farms that participate, and then have the option to get to level three records for farms that are interested. And then we can benchmark those against statewide and national data about how other farms are doing. Those farms also very anonymously contribute to that statewide and nationwide data. So we'd like to ask you some poll questions for after today's presentation, the first one being, do you plan to spend more time reviewing your financial documents and history prior to meeting with your lender? Do you feel like you have a better understanding of the lender process? And, finally, do you feel like the information that was presented can help you become more confident in working with your lender? And Jon has put up the poll, if people would just take a moment and answer the questions very quickly. And then we'll take questions. - One question that came in, will this webinar be available to review later? Yes, these recordings will actually be made available. We're hoping to have them up within about a week or two following the conference. And so they are gonna be recorded and made available for later review for you folks. It looks like we've got almost everyone that's kinda filled out our poll question. Give everyone just a couple more moments. We get a couple more responses from folks. If you've got questions, feel free to put them into the chat. We'd be happy to answer them. We've got a couple minutes here that we can devote to questions. - Well, thanks for being here and thanks for participating in our polls. And again, we're open for questions. We have a couple more minutes for questions, if anybody has any. - And just to kinda give everybody an idea, as we wrap up here today, we'll actually close out this session. And so if you wanna go into the next session that starts at 10 o'clock, you'll need to just click the same link that you used to get into this session again. And we'll kinda be following that pattern throughout the day if you're gonna be attending multiple sessions here with our Farm Business team. And not seeing any questions in the chat, so we'll go ahead and we'll get this thing wrapped up, and give everyone a little bit of a break before our next session at 10 o'clock. We hope to see all you folks there, and thanks again for comin' out. Nope, we did have one last question that came in. Ah, so the question is, regarding the data you mentioned from other farms' profitability history, how can we access that? Corey, you wanna answer that real quick? - Yeah, there is a database. Jon, will you put up the link? It's called FINBIN, and it's done by the University of Minnesota. And you can narrow down the data. It has profitability and a ton of different data for farms across the country. And you can narrow that down to the farms that you're interested in, particularly the Michigan farms, and farms of your type that you would like to compare your farm against. And so you can go to that website and do all that. There's benchmarking reports, there's averages. There's really a lot of data. You go down quite a rabbit hole looking for information that you might wanna compare your farm to. - Thanks for the question. All right, thanks again, everyone. We're gonna go ahead and wrap this session, and we'll hope to see you at the next one here at 10 o'clock.