Agriculture and rural property loans require more information than a typical home mortgage. The FCS Financial application includes a balance sheet. If you’ve downloaded our loan application, you realized this form asks for more information than your name, address and social security number. This article will help you determine what goes under each heading so that you can obtain a farm or rural property loan. Download a sample balance sheet.
What is a balance sheet?
A balance sheet summarizes a farm or individual’s assets, liabilities and equity at a specific point in time.
Why does FCS Financial require a balance sheet?
We require a balance sheet so that we can evaluate your total operation during the credit process and provide the best loan product to meet your needs. Our products are customized to each individual.
After you’ve opened the balance sheet, you may have noticed it has several categories you may not be familiar with:
- Current assets & liabilities
- Intermediate assets & liabilities
- Long term assets & liabilities
So what do all these words mean? Keep reading and we’ll define them so you can complete your balance sheet.
Current Assets (Left Column)
Items owned or money owed to you or the farm that will be used or converted into cash within the next 12 months. Below are some examples of current assets.
- Cash on hand and/or accounts receivable
- Checking or savings accounts
- Livestock – only those for sale, not breeding livestock
- Growing crops
- Stored grain or forage
- Supplies – goods or services that have been prepaid but you haven’t received any income from yet
Intermediate Asset
Intermediate assets are items owned that are used to support the production activities of the farm. These items have a life span from two to 10 years. Below are examples of intermediate assets.
- Breeding livestock
- Machinery
- Personal vehicle
- Retirement accounts
- Securities not readily marketable – this includes stock in local cooperatives
- Recreational vehicles (ATV, boat, camper, horses not used for breeding, etc.
Long-Term Asset
This is where you list any asset, typically real estate, which has a life beyond 10 years. This section is where you show any improvements that you’ve made to the property or buildings on the property. Here are some examples:
- Farmland
- Buildings
- Residence (Home)
- Farm Credit Stock
- Other real estate (vacation home, rental units, non-agricultural property, etc.)
Now we shift to the right column — liabilities.
Current Liabilities (Right Column)
A current liability is an obligation that you owe within the next 12 months. Below are some examples.
- Accrued income tax & social security that has not been paid
- Accrued tax (real estate, property) that has not been paid
- Accounts payable to suppliers
- Accrued interest on intermediate and long term liabilities (this is the interest that is due within the next 12 months)
- Notes payable - include the current principal balance of any loans taken out to fund operating needs (feed, seed, inventory, supplies, etc.) that are expected to be repaid within 12 months. This includes but is not limited to:
- revolving lines of credit,
- operating loans,
- FSA loans, including Commodity Credit Corporation (CCC) loans.
- Cash rent – that has not been paid yet
- Personal debts (credit cards)
Intermediate Liabilities
These are debts that are due within the next 10 years. Below are examples.
- Notes payable – principal amounts only because the interest is a current liability; these are usually capital purchases
- Vehicles
- Equipment
- Machinery
- Breeding livestock
- Building improvements
- Personal loans taken out for educational expenses, refinance, vacation, etc.
Long-Term Liabilities
Debt that is extended beyond 10 years. Most often, this is real estate debt.
After you complete all the columns, follow the directions next to each line. They will tell you which figures to add and subtract to complete your balance sheet.
To learn more about applying for a farm or rural property loan at FCS Financial, download our application or contact one of our loan officers.
