Blog   Tagged ‘loans’

How to secure an ag loan

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If you’re in the agriculture business, you know that securing a loan is an important step to reaching milestones like purchasing new equipment or additional land. When you decide it’s time to borrow money – no matter if it’s your first loan or for additional funds – there are a few tips that can help make the process more efficient and effective.

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The four phases of securing an ag loan:

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1) Application Phase

Determine what you want and why. The amount, term and purpose of the loan will be essential to understanding the risks and cash flow burdens you will incur as well as for the lender to understand your needs. This may sound basic, but it is the most important and often times overlooked portion of the loan request process.

It’s okay to be a little unclear as to the right structure for the loan as this is a task that should be done in collaboration with a lender. The lender should work carefully with you to determine how the loan will work going forward and what it will be used for. Loans borrowed for one specific purpose and then used for another is the most frequent cause of stress and problems between ag borrowers and lenders.

2) Information Phase

During this phase, it is important that you be open with your lender. There are three areas you should be prepared to discuss:

  • Copies of your last three years of tax returns and a current financial statement (balance sheet) with complete and full disclosure of all assets and liabilities
  • A realistic value of your assets — Any exaggeration will make a negative impression of your approach to the borrowing process and financial matters.
  • How your operation has changed over the last several years, as well as your expectations for the years ahead — A realistic valuation is one of the most significant aspects of a lender’s assessment of your financial and operational planning capabilities. If you have been through a difficult time period, be prepared to discuss this candidly and to share the causes and cures for these troubles.

3) Analysis Phase

Meet with more than one lender. This may allow for more options on loan terms, rates and structure. Be candid with the lenders in telling them that you are talking to more than one lender.

Ask the lender’s opinion on your loan request, financial strength and plans for the future. If the lender is vague or reluctant to share an opinion, you may need to speak with another bank. Whether their opinion is good or bad, a clear understanding of their thoughts on your financial situation and the direction you are headed is critical to your financial future with this lender. This conversation is one that many avoid because it can be stressful and awkward, but this is where you can receive the greatest value from a lender. This exchange will also provide insight as to the quality of the lender and financial institution you would be working with.

4) Decision Phase

Plan on learning from this experience. Whether the decision on your application is a yes or a no, you have the right to understand the reason and the rationale behind it.

  • With a yes comes the requirement that you understand what the decision means to future operations and cash flow and whether or not it meets your initial needs.
  • With a no comes the difficult but important personal understanding of why the decision was negative and how your operation needs to change so that it will be more credit worthy going forward (at least in the eyes of this particular lender).

In all borrowing discussions, the most important aspect is candor, both with you and with a lender. A realistic third party assessment of your operational and financial affairs can be a valuable insight that can only be gained through a candid and open discussion with knowledgeable people.

For more tips on securing loans, read our lender’s inside scoop.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Mr. Watson serves as president of the UMB Agribusiness Division. He joined UMB in August of 2005 and has also served as the president of the UMB Kansas region. Watson is a graduate of Wabash College in Crawfordsville, Indiana with a major in Psychology. He has also attended The Colorado School of Banking, The National Commercial Lending School (where he has also been an instructor), and the Stonier Graduate School of Banking.



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Debunking credit score myths

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In an earlier blog post, we explained why credit scores are important and how to improve yours. For many people, it can seem as if their score was pulled blindly from a hat. So let’s take a look and debunk a few myths.

Credit Score Myths

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Ms. Stokes is a senior vice president and director of Private Banking at UMB. She is responsible for driving sales and relationship management activities. She works closely with the Wealth Management leadership team and regional presidents to grow business and helps to develop roles in wealth management, relationship management and presentation skills. She joined UMB in 2009 and has more than 30 years of experience in the financial services industry. She earned a bachelor’s degree in business administration from the University of Missouri- Kansas City and a Bachelor of Arts from the graduate school of retail banking.



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Credit Score: understanding the number

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Cholesterol, blood pressure, glucose, credit score…all numbers that mean nothing unless someone explains what is good and what is scary. Just like a doctor breaks down why your cholesterol level should be below 200, we’re here to explain what an ideal credit score could be. And you don’t even have to cut cheese out of your diet.

Your credit score (the most popular being the FICO® Score named after the organization that created it — the Fair Isaac Corporation) can range from 300 to 850 because it’s an adjusted scale. (You get 300 points just for having a credit history…so most adults have a higher score than 300 just by being “on the grid.”) In case you’re afraid to get the pronunciation wrong, FICO is pronounced “f-eye-ko,” like “psycho.”

Why does it matter? If you’re ever going to purchase a house or car or apply for a job, lenders and potential employers will be checking your score to assess your reliability and financial history.

While there are some schools of thought that advise consumers not to obsess over credit scores, the most popular being financial author and radio host Dave Ramsey, the FICO Score is a factor in 90 percent of lending decisions in the United States. And many in those anti-credit score camps still encourage you to be aware of your credit reports to check for errors and work on problem areas.

Most important step: check your score and your reports! Even if you’re worried because of past mistakes with late payments or credit card debt, it’s better to know where you stand and start taking action. No ostrich-like behavior!

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Good news—unless you’re within the 7 percent of the nation with a score between 350 and 549 (and if you are, stop reading this post and call a credit counselor), there is no need to stress. At a score of 550 or more, you can sometimes qualify for a loan. Your motivation for raising it as high as possible will be to get the best interest rates.

Most creditors consider a score above 700 to be acceptable to give a consumer the best rates. If your score is below 700, here are some tips that can help you bring it up. You may be surprised how quickly you can make a change (1-3 years instead of the 7-10 years it takes to start fresh after declaring bankruptcy).

How to raise your score:

1)    Understand how the score is decided

Credit Score Formula

In order of greatest to least weight:

  • Payment history – Did you pay all your bills on time? This includes student loans, car payments, credit card bill, etc.
  • Amount owed – for example, you still owe $10,000 before you can pay off your car, $15,000 in student loans and $500 on one of your credit cards.
  • Credit history length – something positive about getting older! The longer you have a credit history, the higher your score rises.
  • New credit – did you recently open a slew of store credit cards in order to get a discount on a shopping spree? You may be paying for it in the form of a lower credit score.
  • Type of credit used – Credit bureaus look at mortgages vs. auto loans vs. student loans vs. credit cards. Some are better for your score than others.

2)    Stay on top of your bills
The best way to improve on your credit score is to pay your bills on time. Have a steady income and live within your means so your bills don’t pile up until you’re completely buried in credit card and loan debt.

3)    Ask about your custom credit score
Lenders might also look at your custom credit score in addition to your traditional credit score. A lender will use your custom credit score to get a closer look at the risk factors that are related to what you are trying to fund with the line of credit.

4)    Discuss internal credit scoring
Not every creditor is required to report your credit. Some major lenders use their own internal credit scoring systems to help them make a decision. Lenders use these internal scores to predict future behavior of their customers. When you answer questions on the loan application form, the responses will go in to creating a custom score for you.

5)    One size doesn’t fit all
What makes you appealing to one lender will not make you appealing to all. If your credit has been damaged, be sure that any new information is reported to credit agencies.

6)    Pay the minimum
If you can’t pay the entire balance of a credit payment, at least pay the minimum due. Paying the minimum will keep your credit score from dropping even lower than it would if you don’t pay the bill at all.

7)    Keep checking
You have rights as a consumer under the Fair Credit Reporting Act. Check your report (not score) once a year for free at AnnualCreditReport.com‡.

This video from the Federal Trade Commission’s website does a great job at explaining why you need to check your report and how to do it.

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When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Ms. Stokes is a senior vice president and director of Private Banking at UMB. She is responsible for driving sales and relationship management activities. She works closely with the Wealth Management leadership team and regional presidents to grow business and helps to develop roles in wealth management, relationship management and presentation skills. She joined UMB in 2009 and has more than 30 years of experience in the financial services industry. She earned a bachelor’s degree in business administration from the University of Missouri- Kansas City and a Bachelor of Arts from the graduate school of retail banking.



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Financial Word of the Week: Revolving Credit vs. Installment Loans

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FWOTW

Ever been in a meeting with your banker or a cocktail party conversation where a financial term stumps you? Are you considering buying a house or want to plan for the future, but have no idea where to start? Well, look no further. We’d like to be a resource for you and to make all that financial jargon easier to understand. And by the time you’ve read a few of these, the added bonus will be impressing your friends with your new financial wit!

So now, we bring you the perfect (and easy) way to increase your financial knowledge.

What is the difference between revolving credit and installment loans?

Many forms of debt fall into one of two categories: revolving credit and installment loans. When you borrow money from a bank, you can choose to borrow a certain amount and pay it back in a set number of months (in installments) with an installment loan. Or you can choose revolving credit where you do not have a set end date. Instead, these accounts have a credit limit, which is the most you can borrow. At any time, you can use your credit line up to that maximum amount. As you make your monthly payments, your line becomes available again, if you need to use it. By contrast, an installment loan pays out only once at the beginning of the loan, such as a one-time purchase, and cannot be used again as you pay it down.

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So what does this mean for me?

You have choices when you need to borrow money. Some customers enjoy the flexibility of revolving credit options, like a home equity line of credit (HELOC) or credit card. Others prefer the fixed terms and certainty associated with an installment loan. As we will discuss over the next few weeks, different lending options have different criteria, different benefits and different costs.  The most important thing to remember is that a loan or line of credit should fit your budget. Different accounts have different payment options, allowing you to choose a payment plan that works for you.

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UMB Financial Corporation (Nasdaq: UMBF) is a financial services holding company headquartered in Kansas City, Mo., offering complete banking, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska and Arizona. It also has a loan production office in Texas. Subsidiaries of the holding company include mutual fund and alternative investment services groups, single-purpose companies that deal with brokerage services and insurance, and a registered investment advisor that manages the company's proprietary mutual funds and investment advisory accounts for institutional customers.



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A note from our CFO

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This year, UMB has celebrated many achievements in reaching our 100-year milestone. One thing we are particularly proud of is our ongoing effort to be transparent in our communication.

You may have read the news articles about two specific things: depositor exiting UMB and our capital raise project. First and foremost, I want to clearly state that these two topics are completely unrelated. Anyone who has ever been through a common stock offering knows it’s not something you can pull off in a couple of days. The timing of the two events was unfortunate, because it created incorrect assumptions. We did not execute a capital raise because of the depositor.

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To comply with securities rules related to our stock offering, we were limited in what we could say about the depositor. However, now that we are on the other side, I would like to take the opportunity to provide more context.

  • Depositor
    A few notes on the depositor. The organization is still a UMB customer. We previously disclosed that the deposits would move over the next 120 days, and as of today, the deposits remain on our balance sheet. Additionally, the customer will continue to work with UMB on their asset servicing business even after the deposits have exited.The decision to move the deposits off of our balance sheet was a result of ongoing dialogue we have had with the customer for the past couple of years. UMB has had a longstanding risk management strategy, and during a review of potential deposit concentrations, we approached the customer to reduce their deposits. They did so, but because of continued growth in the customer’s business, the deposits began increasing again. UMB will continue to monitor our deposit concentrations and will continue to make decisions that are best for our company and our shareholders. We have multiple unique sources of deposits: Institutional Banking and Investment Services (IBIS), Fund Services and Health Savings Accounts (HSAs) just to name a few, so it is important that we are continuously monitoring and adjusting as appropriate.
  • Capital Raise
    Our company has been growing steadily over the past few years and that is evident in our financial results. We have experienced robust balance sheet growth, especially in loans. After we completed our recent forecasts, it was clear that the expectations for growth would continue. We needed to grow our capital to support our balance sheet growth. We plan to use the money raised to support our continued growth and for general corporate purposes.When I tell my kids what I’ve been up to the last couple of months, I essentially tell them that I went to New York and asked strangers and current shareholders to invest in our company. And based on our consistent and stable growth for more than 100 years, they gave us more than $200 million.A simple analogy—but it essentially describes our capital raise campaign. Also important to note, the majority of the investors are new to UMB which validates our current investors, and is a testament to the work our associates have been doing over the last century.

I hope this gives you some color to our recent news. It’s a fantastic time for UMB and I look forward to what the next 100 years will bring!

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Mr. Hagedorn is president and chief executive officer of UMB Bank and vice chairman of UMB Financial Corporation. Prior to this role, Hagedorn served as chief financial officer and chief administrative officer of UMB Financial Corporation. He joined UMB in March 2005.



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