Tips for Speaking with Your Lender

by: Chris Zoller, Extension Educator, ANR

2019 is upon us and you may be meeting soon with your lender to discuss financial needs for the year. We all know agriculture is suffering from poor economic conditions – and the outlook for many sectors of the industry doesn’t look real promising. A variety of factors are forcing lenders to be more critical of loan applications. Let’s review a few things you can do to assist your lender as they review your loan application.

Financial Forms:

A year-end Balance Sheet is very helpful and provides a snapshot of the assets, liabilities, and net worth of your farm. Get in the habit of completing one each year for your lender to keep on file and for your own reference so you can monitor changes over time. You can get a blank balance sheet from your lender or access one here: https://farmoffice.osu.edu/farm-management-tools/farm-management-resources.

Cost of Production:

Know your cost of production. What does it cost you to produce 100 pounds of milk? What is your per acre or per ton cost to grow and harvest crops? If you need assistance with determining these, please see: https://farmoffice.osu.edu/ for copies of Ohio State University Extension production budgets and https://farmprofitability.osu.edu/business-summariesfor copies of the Ohio Farm Business Summaries.

Goals:

Why are you requesting money from your lender? What is your goal(s)? What are you hoping to accomplish with the money you are requesting? Will you use the money as an operating loan to plant your crops? Are you planning an expansion? Are you wanting to consolidate existing debt? Regardless of the reason, your lender is going to need to know how you plan to repay the loan. A budget and cash flow projections will help everyone understand how the money will be used and how it will be repaid. Research has proven that you are more likely to accomplish your goals if they are written. Be sure your goals are Specific, Measurable, Attainable, Rewarding, and Timed (SMART). See this Ohio State University Extension fact sheet for information about writing SMART goals: https://ohioline.osu.edu/factsheet/node/767.

Tax Returns:

Your lender may request copies of your tax returns. Make sure you categorize income and expenses the same way each year. This allows the lender to compare apples-to-apples when evaluating your historic income and expenses. Also, if you pre-pay expenses or defer income, make sure your lender is aware of this so they can make accrual adjustments.

Communication:

Communication with your lender is critical. Your lender is interested in understanding your farm, knowing how you are progressing, and what your plans are for the short and long-term. Invite your lender to visit the farm for a tour, a ride in the tractor, or to assist with milking!

Business Plan:

Every lender would love to see each client have a written business plan. A business plan is made up of five parts: Executive Summary, Description, Operations, Marketing Plan, and Financial Plan. The University of Minnesota Extension has a template available at the following site: https://agplan.umn.edu/.

Summary: The items discussed in this article are ones you can control. Focus on these areas and make adjustments accordingly to make improvements. Contact the Knox County Extension Office for assistance.

We bring you tidings of gifts and tax implications in this season of giving

Source: Ohio Agricultural Law Blog

The holiday season stands out as one of the most generous times of year as people give gifts to the people they love.  What better way to get into the holiday spirit than to talk about the tax implications of your gifts?  There are three shopping weekends left until December 25th, so here are three highlights about the federal gift tax that you should know:

1. The federal gift tax is assessed on the person who gives the gift, not the person who receives the gift.

An individual who gives a gift of cash or assets with a fair market value greater than $15,000 to any one person in a given year will have to report the gift(s) using IRS Form 709 when filing taxes for that year.  These forms cannot be filed jointly, so if a married couple gives a gift that is worth more than $30,000 to any one person, both of them must file IRS Form 709 and report half of the value of the gift.

Form 709 requires a few pieces of information about the gift and who receives the gift.  It asks for things like a description of the gift, the recipient’s name and address, when it was given, and its value.  While documentation or receipts do not have to be submitted with Form 709, filers should keep records for themselves about the gift in case the IRS has questions.

The gift tax rates for 2018 range from 18 to 40 percent.  The rates depend upon how much in excess of the $15,000 exclusion the gift is valued.  For instance, a gift valued at $20,000 would have no taxes on the first $15,000, but the $5,000 over the $15,000 threshold would be subject to an 18 percent tax.  The 40 percent rate applies to gifts valued at $1,015,000, or $1,000,000 over the $15,000 exclusion.

Fortunately for the recipient, the gift does not count as income to the recipient because the gift falls under the gift tax rules instead of the income tax rules. Continue reading

Tax Reform: What’s on the Table?

by: John Barker

Tax reform continues to be a hot topic.  Proposed changes to the Estate, Gift and Generation-Skipping taxes could all have significant impacts on Agricultural businesses.

Kristine A. Tidgren, Assistant Director for the Center for Agricultural Law and Taxation at Iowa State University provides an excellent summary and update on the current status of the tax reform proposals.  CLICK HERE TO READ MORE…

Save The Dates!

by: John Barker

The dates for most of our Agronomy & Farm Management winter meetings are set.  I am still finalizing a few details, but you can put these dates on  your calendars.  Be sure to check back for more details.

 

January 11 & 18 –     Estate Planning – “Planning for the Future of Your Farm” Workshop 6 – 9 p.m.

January 30 –              Pesticide & Fertilizer Certification 6 – 10 p.m.

February 5 –              Central Ohio Agronomy School 6:30 – 9 p.m.

February 12 –            Central Ohio Agronomy School 6:30 – 9 p.m.

February 19 –            Central Ohio Agronomy School 6:30 – 9 p.m.

February 26 –            Central Ohio Agronomy School 6:30 – 9 p.m.

March 5 –                   Central Ohio Agronomy School 6:30 – 9 p.m.

March 29 –                 Pesticide & Fertilizer Certification 9 a.m. – 1 p.m.