These are terms you may hear when meeting with your loan officer to discuss your agriculture or land purchase.
Adjustable-rate loan - Loans where the interest rate is adjusted after a certain period. At the repricing date, the rate is reset based on current rates for the selected period. This process continues until payoff.
Agricultural assets* – Assets that are used in the production, marketing, or processing of agricultural products.
Agricultural land* – Land improved or unimproved which is devoted to or available for the production of crops and other products such as, but not limited to, fruits and timber or the raising of livestock.
Appraisal – The act or process of developing an opinion of value. An appraisal is numerically expressed as a specific amount, as a range of numbers, or as a relationship to a previous value opinion or numerical benchmark.**
Appraisal report – Any communication, written or oral, of an appraisal or appraisal review that is transmitted to the client or a party authorized by the client upon completion of an assignment.**
Appraisal value – The monetary relationship between properties and those who buy, sell or use those properties, expressed as an opinion of the worth of a property at a given time.**
Appraiser – One who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective**
Assets – Items owned that have a cash value.
Balance sheet – A statement as of a specific date that summarizes a farm or individual’s assets, liabilities and equity at a specific point in time. Also known as a financial statement.
Beginning farmer – Someone who has been engaged in production agriculture for fewer than 10 years.
Capacity – All funds available for servicing the needs of the borrower including the ability to pay current financial commitments, repay any new debt, provide for replacement allowances, make payments for family living and maintain reserves for adversity.
Capital - Capital allows a lender to see how much an applicant has personally invested in a business. Capital looks at both the equity (net worth) and the working capital (liquidity) of the borrower.
Character –A borrower’s likelihood to have the ability and willingness to repay loans. The character factor begins when an applicant makes the initial contact with a loan officer. Prepare for your meeting with the lender by reflecting positive signs of character by a desire to establish a relationship with the lender, provide good credit history and a clean background.
Conditions - Define the purpose of the loan, what the money will be going towards specifically and any possible outside effects such as the financial strength of suppliers.
Collateral - Considered a secondary source of repayment; the primary source being cash flow. Collateral is made up of assets such as real estate, livestock and equipment that can be pledged to the lender as a form of security in case a borrower fails to pay back the loan.
Conventional residence - Frame, brick, or similar structure built on the site that is considered typical for the area.
Double-wide mobile home residence – A manufactured home affixed to real estate. The home must be fixed on a permanent foundation to be eligible collateral for a mortgage
Down payment – Initial payment that is made by the borrower towards the purchase of an asset.
Fixed rate loan - A loan where the interest rate is fixed for the life of the loan. Fixed rate real estate loans are offered for terms of 5 - 30 years. Fixed rate loans can also be made for purchases of livestock, equipment, and other shorter-term needs.
Interest rate – The percentage that is charged to the borrower in order to borrow money.
Interest rate conversion – Change from one loan product or interest rate to another. Conversions are generally less costly and easier than refinancing a loan. Certain restrictions apply.
Liabilities – Debts or financial obligations that the applicant is responsible for paying.
Modular residence – Pre-built in units or models that are joined in various configurations at the site. Construction must be of durable material by well-established manufacturers to be considered collateral for a mortgage
Net worth – Total assets minus total liabilities; the amount remaining if all assets were liquidated and debts repaid.
Refinance – Finance something again, usually with a different interest rate or terms.
Row crops – Typically corn, soybeans, milo, wheat or oats that are sowed into the ground.
Rural community* – Any area of the United States not included within the boundaries of any incorporated or unincorporated city, village, or borough having a population in excess of 50,000 inhabitants.
Rural resident (rural home) loans - A loan for the purchase or refinance of a primary residence, secured with the primary residence, that does not generate, or is not capable of generating $1,000 of annual gross farm income.
Small farmer - Most recent earnings statement shows gross farm income less than $250,000.
Tax Returns – Annual federal and state tax forms that are completed and provided to a lender to show earnings history from all sources.
Variable rate loan – A loan where the interest rate is subject to adjustment once per month.
Veteran - A former member of the Armed Forces of the United States (Army, Navy, Air Force, Marine Corps, and Coast Guard) who served on active duty and was discharged under conditions, which were other than dishonorable.
Working capital – The amount of margin available to cover expenses. Working capital is based on current assets minus current liabilities.
Young farmer – Anyone involved in production agriculture age 35 or under.
*FCA Regulations 613.3000-3005, Examination Bulletin FCA 2006-2 – Lending Programs for Farmers’ Other Credit Needs dated October 17, 2006, and District Underwriting Guide, Section 200 (Eligibility).
**2020-2021 Uniform Standards of Professional Appraisal Practice (USPAP)
