Credit Evaluation School Instructor eBook - Oct 2023

People:

O. Mack Donald Local grain farmer who owns 2,000+ acres Long time customer and excellent credit score

Purpose:

Fund current year’s ag operating line of credit for inputs, rents, etc. One year note due at maturity with semi ‐ annual interest only payments Repayment from profitable sales of grain once harvested Cash flow projection shows 1.02x DSCR Debt ‐ to ‐ assets ratio of 26% Positive earned net worth trend for three of previous four years

Payment:

Protection:

First lien real estate mortgage on 2,000 acres Blanket farm assets security agreement ‐ first position Loan ‐ to ‐ value at 59%

Problem:

Ag economy is struggling Grain prices have further declined from cash flow projections Borrower will likely have minor carryover debt to term out next year

Prospects:

Ability to term out carryover debt against real estate Solid financial position