ASCI 342 Poultry Business Management Obtaining Financing – Flashcards
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Types of Financing:
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- Short term: Line of Credit - Short Term: Prebuy Line of Credit - Intermediate: 2-7 years - Long Term: 8 or more years
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Short Term Line of Credit
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- Get money if you want to pay back later - Money goes in and out of account - 1 year
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Short Term Prebuy Line of Credit
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- corn is collateral - when all corn is gone, that's when you pay for it - no more than 6 month supply
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Intermediate:
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2-7 years Vehicles or computers
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Long Term
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8 or more years - real estate - big equipment - commercial bank
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Obtaining a Line of Credit:
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- operating Capital - prebuys - Not for purchase of fixed assets - Zero balance for 60 days - Collateral
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Collateral:
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Stuff with short term value - Receivables - Inventories - Personal Guarantees
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Receivables:
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- money owed to you from other companies or people - After 120 days, assume you won't get it
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Inventories
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- live poultry - eggs on ranches - products in cooler - packaging materials
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Personal Guarantee
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Bank has you sign to prevent too many benefits from corporate veil
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Where is Money Available?
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- Production Credit - Commercial Banks - Personal Assets - Aunt Sally - Sale of Company Assets
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When to Obtain Loan?
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- when you don't need it
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Documentation
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- Financial statement/ Balance sheet (shows net worth) - Budget - Cash Flow Projection - Personal Guarantee Forms
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Budget:
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Best estimate of cost of production - Guideline of what we expect to spend
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Cash Flow Projection
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Like Budget but with some fudging
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Payback Intermediate Loans...
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2-7 years
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Intermediate Collateral:
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- equipment to be purchased - Other company assets - Personal Guarantee
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Intermediate: Where is Money Available
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- Production Credit - Commercial Banks - Insurance Companies - Lease Options
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Intermediate Documentation:
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Tax returns of past 3 years
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Long Term Collateral:
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- Deed of Trust - Company Balance Sheet - Personal Guarantee
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Long Term Funds Available:
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- Federal Land Bank - Commercial Lenders - Insurance Companies - Sale of Company Stock
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Long Term Documentation:
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- Tax returns, financial statements
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Documentation:
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- Accrual Profit and Loss Statement - Balance Sheet - Cash Flow Projection - tax returns - Personal Guarantee
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Interview with Bank Representative
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- Review documentation - Tour facilities
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PRAY
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A little something extra to get approved
