Advice You Can Take
To the Bank
by John Hospenthal, vice president commercial account officer, F & M Bank, Lodi We live in a time of increasing regulation and the rules seem to always be changing. Your banker is probably asking for more and more documents every year to satisfy some of these new rules. Heading to the bank to renew your line of credit or apply for a new loan can be a stressful and frustrating experience, but having the proper information and providing a complete and quality financial package can make this process easier. Understanding why the banker is asking for this information is also important. Just as regulations and rules are changing, cattle operations are changing too. More and more producers are incorporating or forming limited liability companies to manage taxes and other risks in their operations. Living trusts and other estate planning methods are also adding to the complexity of operations, and are a necessary way to prepare to pass
the ranch on to the next generation. Hopefully you’ve already consulted with your CPA and attorney about this. Your Financial Picture The importance of proper financial reporting that goes along with this added complexity is becoming more and more important to us bankers as we analyze your
request. Like your horses, or ATV, are the tools of your trade, these financial statements and tax returns are the tools of our trade. We may even be asking for financial statements of
26 California Cattleman June 2014
increased quality prepared by your CPA, which is a common practice as your operation grows its borrowings and its complexity. The better the quality of these tools, the better the job we can do for you using them them, even to the extent of reduced fees, reduced interest rates, or less loan controls. Needless to say, a client who provides well prepared and organized financial statements is going to be viewed by the bank as being better managed and more poised for success than a client who provides a cocktail napkin with a few numbers on it. A well prepared and complete financial package also makes the road to loan approval much smoother. These financial statements are also important to you in order to monitor profitability, liquidity, and leverage. Knowing what is in your financial statements and your tax return, and making sure the information is accurate, can mean the