Financing Changes During COVID-19

Communication with lenders is the critical action producers can take to maintain financial standing and flexibility during the COVID-19 pandemic. Some producers may be in a situation where lender communication is not enough. Their business may now be in a situation where refinancing is required, and new financing options need to be explored.

What will you need and how can MNP help?

1. Plan

Have a plan regardless of the information required by the lender. Simply asking to refinance doesn’t give the lender an understanding of what needs to be done. Having a plan, on the other hand, does. For example, maybe there is no room on the operating line, and they should move the balance to long-term debt. Maybe the debt structure is too aggressive, and you would be better served with a longer payment schedule or moving to interest only for a year or two.

If you can be helped with a restructure, but are unclear of how, MNP’s Farm Management Consultants (FMC) can assist.

2. Start with financial statements

For those with strong statements and good equity, current year financial statements may be all the lender needs. Strong financial statements give the bank confidence the business will continue to perform at a high level and reduce the risk they are taking on by lending additional capital or refinancing.

3. Consider Adjusting to a Net Worth

You may not be able to obtain new financing or refinance with financial statements alone because the equity position is not clear. Maybe you have equity in your personal name or multiple companies. Maybe the book value of your assets underrepresents the fair market value. In these situations, engaging your FMC to create a net worth will help clearly show the lender your true equity position and increase the likeliness that the ask is successful.

4. Create a Financial Projection

If the ask is large, the financial statements do not show strength and / or there is an upcoming change to the business, a financial projection may be necessary. A financial projection will show what effect this change will have on the business when history doesn’t represent the future.

If you don’t have an up-to-date financial projection for your operation, contact your local Farm Management Consultant to get started.

Learn more at MNP's COVID-19 Business Advice Centre

Strategies and tools to help your company navigate the coronavirus crisis, stay resilient and take the next steps towards recovery.

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