Best CaseIncome Statement (Unaudited)(for years ending September 1)20122013201420152016F2017F2018FNet Sales$ 459,000.00$ 550,800.00$ 688,500.00$ 895,050.00$ 1,529,307.50$ 1,758,703.62$ 2,022,509.17Cost of Goods Sold$ 137,700.00$ 165,240.00$ 206,550.00$ 268,515.00$ 458,792.25$ 527,611.09$ 606,752.75Gross Profit$ 321,300.00$ 385,560.00$ 481,950.00$ 626,535.00$ 1,070,515.25$ 1,231,092.54$ 1,415,756.42Operating expensesAdvertising and promotion$ 36,720.00$ 49,572.00$ 68,850.00$ 98,455.50$ 137,637.68$ 158,283.33$ 182,025.83Depreciation$ 26,371.90$ 27,914.80$ 28,387.70$ 28,492.50$ 80,335.70$ 80,335.70$ 80,335.70Insurance$ 20,655.00$ 24,786.00$ 30,982.50$ 40,277.25$ 68,818.84$ 79,141.66$ 91,012.91Legal and accounting$ 27,540.00$ 33,598.80$ 42,687.00$ 53,703.00$ 91,758.45$ 105,522.22$ 121,350.55Office expenses$ 1,463.00$ 1,417.00$ 3,337.00$ 3,164.53$ 61,172.30$ 70,348.14$ 80,900.37Repairs and Maintenance$ 1,463.00$ 1,417.00$ 3,337.00$ 3,164.53$ 45,879.23$ 61,554.63$ 80,900.37Rent$ 32,130.00$ 33,048.00$ 34,425.00$ 35,802.00$ 76,465.38$ 87,935.18$ 101,125.46Telephone$ 9,180.00$ 12,668.40$ 17,212.50$ 17,901.00$ 30,586.15$ 35,174.07$ 40,450.18Utilities$ 13,770.00$ 16,524.00$ 20,655.00$ 26,851.50$ 45,879.23$ 52,761.11$ 60,675.28Wages and benefits$ 68,850.00$ 93,636.00$ 130,815.00$ 187,960.50$ 152,930.75$ 175,870.36$ 202,250.92Total operating profit$ 83,157.10$ 90,978.00$ 101,261.30$ 130,762.70$ 279,051.56$ 324,166.13$ 374,728.86Interest expense$ 9,906.53$ 8,259.62$ 6,527.69$ 6,154.79$ 32,359.79$ 28,709.79$ 25,009.79Income before taxes$ 73,250.57$ 82,718.38$ 94,733.61$ 124,607.91$ 246,691.78$ 295,456.35$ 349,719.08Income taxes$ 29,300.23$ 33,087.35$ 37,893.45$ 49,843.17$ 98,676.71$ 118,182.54$ 139,887.63Net Income$ 43,950.34$ 49,631.03$ 56,840.17$ 74,764.75$ 148,015.07$ 177,273.81$ 209,831.45Statement of Retained Earnings (Unaudited)(for years ending September 1)20122013201420152016F2017F2018FBeginning retained earnings$ 39,506.00$ 83,456.34$ 133,087.37$ 189,927.54$ 264,692.29$ 412,707.35$ 589,981.16Add: Net Income43,950.3449,631.0356,840.1774,764.75148,015.07177,273.81209,831.45Ending retained earnings$ 83,456.34$ 133,087.37$ 189,927.54$ 264,692.29$ 412,707.35$ 589,981.16$ 799,812.61Balance Sheet (Unaudited)(as at September 1)20122013201420152016F2017F2018FASSETSCurrent Assets:Cash$ 83,908.08$ 73,963.91$ 71,971.28$ 95,208.03$ 129,326.32$ 273,659.18$ 428,521.69Accounts Receivable$ 82,620.00$ 99,144.00$ 123,930.00$ 161,109.00$ 275,275.35$ 316,566.65$ 364,051.65Inventory$ 59,670.00$ 82,620.00$ 106,717.50$ 143,208.00$ 229,396.13$ 228,631.47$ 242,701.10Prepaid expenses$ 12,341.00$ 13,528.00$ 13,459.00$ 13,002.00$ 13,000.00$ 13,250.0 ...

1. Best CaseIncome Statement (Unaudited)(for years ending
September 1)20122013201420152016F2017F2018FNet Sales$
459,000.00$ 550,800.00$ 688,500.00$ 895,050.00$
1,529,307.50$ 1,758,703.62$ 2,022,509.17Cost of Goods
Sold$ 137,700.00$ 165,240.00$ 206,550.00$ 268,515.00$
458,792.25$ 527,611.09$ 606,752.75Gross Profit$
321,300.00$ 385,560.00$ 481,950.00$ 626,535.00$
1,070,515.25$ 1,231,092.54$ 1,415,756.42Operating
expensesAdvertising and promotion$ 36,720.00$ 49,572.00$
68,850.00$ 98,455.50$ 137,637.68$ 158,283.33$
182,025.83Depreciation$ 26,371.90$ 27,914.80$ 28,387.70$
28,492.50$ 80,335.70$ 80,335.70$ 80,335.70Insurance$
20,655.00$ 24,786.00$ 30,982.50$ 40,277.25$ 68,818.84$
79,141.66$ 91,012.91Legal and accounting$ 27,540.00$
33,598.80$ 42,687.00$ 53,703.00$ 91,758.45$
105,522.22$ 121,350.55Office expenses$ 1,463.00$
1,417.00$ 3,337.00$ 3,164.53$ 61,172.30$ 70,348.14$
80,900.37Repairs and Maintenance$ 1,463.00$ 1,417.00$
3,337.00$ 3,164.53$ 45,879.23$ 61,554.63$
80,900.37Rent$ 32,130.00$ 33,048.00$ 34,425.00$
35,802.00$ 76,465.38$ 87,935.18$ 101,125.46Telephone$
9,180.00$ 12,668.40$ 17,212.50$ 17,901.00$ 30,586.15$
35,174.07$ 40,450.18Utilities$ 13,770.00$ 16,524.00$
20,655.00$ 26,851.50$ 45,879.23$ 52,761.11$
60,675.28Wages and benefits$ 68,850.00$ 93,636.00$
130,815.00$ 187,960.50$ 152,930.75$ 175,870.36$
202,250.92Total operating profit$ 83,157.10$ 90,978.00$
101,261.30$ 130,762.70$ 279,051.56$ 324,166.13$
374,728.86Interest expense$ 9,906.53$ 8,259.62$ 6,527.69$
6,154.79$ 32,359.79$ 28,709.79$ 25,009.79Income before
taxes$ 73,250.57$ 82,718.38$ 94,733.61$ 124,607.91$
246,691.78$ 295,456.35$ 349,719.08Income taxes$
29,300.23$ 33,087.35$ 37,893.45$ 49,843.17$ 98,676.71$
118,182.54$ 139,887.63Net Income$ 43,950.34$ 49,631.03$

2. 56,840.17$ 74,764.75$ 148,015.07$ 177,273.81$
209,831.45Statement of Retained Earnings (Unaudited)(for
years ending September
1)20122013201420152016F2017F2018FBeginning retained
earnings$ 39,506.00$ 83,456.34$ 133,087.37$
189,927.54$ 264,692.29$ 412,707.35$ 589,981.16Add: Net
Income43,950.3449,631.0356,840.1774,764.75148,015.07177,2
73.81209,831.45Ending retained earnings$ 83,456.34$
133,087.37$ 189,927.54$ 264,692.29$ 412,707.35$
589,981.16$ 799,812.61Balance Sheet (Unaudited)(as at
September
1)20122013201420152016F2017F2018FASSETSCurrent
Assets:Cash$ 83,908.08$ 73,963.91$ 71,971.28$
95,208.03$ 129,326.32$ 273,659.18$ 428,521.69Accounts
Receivable$ 82,620.00$ 99,144.00$ 123,930.00$
161,109.00$ 275,275.35$ 316,566.65$
364,051.65Inventory$ 59,670.00$ 82,620.00$ 106,717.50$
143,208.00$ 229,396.13$ 228,631.47$ 242,701.10Prepaid
expenses$ 12,341.00$ 13,528.00$ 13,459.00$ 13,002.00$
13,000.00$ 13,250.00$ 13,500.00Total Current Assets$
238,539.08$ 269,255.91$ 316,077.78$ 412,527.03$
646,997.79$ 832,107.30$ 1,048,774.44Fixed
Assets:Computer hardware & software$ 17,190.00$
17,190.00$ 18,060.00$ 18,060.00$ 18,060.00$ 18,060.00$
18,060.00Furniture & fixtures$ 11,688.00$ 26,662.00$
30,521.00$ 30,521.00$ 40,000.00$ 40,000.00$
40,000.00Signage$ 9,545.00$ 10,000.00$ 10,000.00$
12,000.00$ 20,000.00$ 20,000.00$ 20,000.00Real Estate$
225,296.00$ 225,296.00$ 225,296.00$ 225,296.00$
725,297.00$ 725,297.00$ 725,297.00Total Fixed Assets
(cost)$ 263,719.00$ 279,148.00$ 283,877.00$ 285,877.00$
803,357.00$ 803,357.00$ 803,357.00Less: Accumulated
depreciation$ 98,398.00$ 126,312.80$ 154,700.50$
183,193.00$ 263,528.70$ 343,864.40$ 424,200.10Net fixed
assets$ 165,321.00$ 152,835.20$ 129,176.50$ 102,684.00$
539,828.30$ 459,492.60$ 379,156.90TOTAL ASSETS$

3. 403,860.08$ 422,091.11$ 445,254.28$ 515,211.03$
1,186,826.09$ 1,291,599.90$
1,427,931.34LIABILITIESCurrent Liabilities:Operating line of
credit ($40,000 limit)$ 26,736.00$ 34,442.00$ 36,000.00$
40,000.00$ 35,000.00$ 35,000.00$ 35,000.00Accounts
Payable$ 19,503.00$ 19,500.00$ 20,150.00$ 22,000.00$
22,500.00$ 23,000.00$ 23,500.00Current Portion of Long
Term Debt$ 35,755.00$ 32,407.00$ 28,929.00$ 22,200.00$
72,500.00$ 72,000.00$ 70,000.00Total Current Liabilities$
81,994.00$ 86,349.00$ 85,079.00$ 84,200.00$
130,000.00$ 130,000.00$ 128,500.00Long Term
Liabilities:Term Bank Loans$ 140,986.74$ 105,231.74$
72,824.74$ 68,895.74$ 546,695.74$ 474,195.74$
402,195.74Deferred Income Taxes$ 13,387.00$ 13,387.00$
13,387.00$ 13,387.00$ 13,387.00$ 13,387.00$
13,387.00Total Long Term Liabilities$ 154,373.74$
118,618.74$ 86,211.74$ 82,282.74$ 560,082.74$
487,582.74$ 415,582.74TOTAL LIABILITIES$ 236,367.74$
204,967.74$ 171,290.74$ 166,482.74$ 690,082.74$
617,582.74$ 544,082.74Shareholder's EquityShare Capital$
84,036.00$ 84,036.00$ 84,036.00$ 84,036.00$ 84,036.00$
84,036.00$ 84,036.00Retained Earnings$ 83,456.34$
133,087.37$ 189,927.54$ 264,692.29$ 412,707.35$
589,981.16$ 799,812.61Total Shareholder's Equity$
167,492.34$ 217,123.37$ 273,963.54$ 348,728.29$
496,743.35$ 674,017.16$ 883,848.61TOTAL LIABILITIES
AND SHAREHOLDER'S EQUITY$ 403,860.08$ 422,091.11$
445,254.28$ 515,211.03$ 1,186,826.09$ 1,291,599.90$
1,427,931.35Statement of Cash Flows(for the year ending
September
1)2013201420152016F2017F2018FOPERATIONS:Net Income$
49,631.03$ 56,840.17$ 74,764.75$ 148,015.07$
177,273.81$ 209,831.45Adjustments to Cash
Basis:Depreciation$ 27,914.80$ 28,387.70$ 28,492.50$
80,335.70$ 80,335.70$ 80,335.70Accounts Receivable$
(16,524.00)$ (24,786.00)$ (37,179.00)$ (114,166.35)$

4. (41,291.30)$ (47,485.00)Inventory$ (22,950.00)$
(24,097.50)$ (36,490.50)$ (86,188.13)$ 764.65$
(14,069.63)Prepaid Expenses$ (1,187.00)$ 69.00$ 457.00$
2.00$ (250.00)$ (250.00)Accounts Payable$ (3.00)$
650.00$ 1,850.00$ 500.00$ 500.00$ 500.00Deferred
Income taxes$ - 0$ - 0$ - 0$ - 0$ - 0$ - 0$
(12,749.20)$ (19,776.80)$ (42,870.00)$ (119,516.77)$
40,059.05$ 19,031.07Net Cash Flow From Operations$
36,881.83$ 37,063.37$ 31,894.75$ 28,498.29$
217,332.86$ 228,862.52FINANCING ACTIVITIESOperating
Line of Credit$ 7,706.00$ 1,558.00$ 4,000.00$
(5,000.00)$ - 0$ - 0Current Portion of Long Term Debt$
(3,348.00)$ (3,478.00)$ (6,729.00)$ 50,300.00$ (500.00)$
(2,000.00)Term Bank Loans$ (35,755.00)$ (32,407.00)$
(3,929.00)$ 477,800.00$ (72,500.00)$ (72,000.00)Net Cash
Flow From Financing Activities$ (31,397.00)$ (34,327.00)$
(6,658.00)$ 523,100.00$ (73,000.00)$
(74,000.00)INVESTING ACTIVITIESFixed Assets$
(15,429.00)$ (4,729.00)$ (2,000.00)$ (517,480.00)$ - 0$
- 0Net Cash Flow$ (9,944.17)$ (1,992.63)$ 23,236.75$
34,118.29$ 144,332.86$ 154,862.52Beginning Cash$
83,908.08$ 73,963.91$ 71,971.28$ 95,208.03$
129,326.32$ 273,659.18Ending Cash$ 73,963.91$
71,971.28$ 95,208.03$ 129,326.32$ 273,659.18$
428,521.69
Worst CaseIncome Statement (Unaudited)(for years ending
September 1)20122013201420152016F2017F2018FNet Sales$
459,000.00$ 550,800.00$ 688,500.00$ 895,050.00$
1,234,555.00$ 1,358,010.50$ 1,493,811.55Cost of Goods
Sold$ 137,700.00$ 165,240.00$ 206,550.00$ 268,515.00$
432,094.25$ 475,303.68$ 522,834.04Gross Profit$
321,300.00$ 385,560.00$ 481,950.00$ 626,535.00$
802,460.75$ 882,706.83$ 970,977.51Operating
expensesAdvertising and promotion$ 36,720.00$ 49,572.00$
68,850.00$ 98,455.50$ 111,109.95$ 122,220.94$
134,443.04Depreciation$ 26,371.90$ 27,914.80$ 28,387.70$

5. 28,492.50$ 80,335.70$ 80,335.70$ 80,335.70Insurance$
20,655.00$ 24,786.00$ 30,982.50$ 40,277.25$ 55,554.98$
61,110.47$ 67,221.52Legal and accounting$ 27,540.00$
33,598.80$ 42,687.00$ 53,703.00$ 74,073.30$ 81,480.63$
89,628.69Office expenses$ 1,463.00$ 1,417.00$ 3,337.00$
3,164.53$ 49,382.20$ 54,320.42$ 59,752.46Repairs and
Maintenance$ 1,463.00$ 1,417.00$ 3,337.00$ 3,164.53$
37,036.65$ 47,530.37$ 59,752.46Rent$ 32,130.00$
33,048.00$ 34,425.00$ 35,802.00$ 61,727.75$ 67,900.53$
74,690.58Telephone$ 9,180.00$ 12,668.40$ 17,212.50$
17,901.00$ 24,691.10$ 27,160.21$ 29,876.23Utilities$
13,770.00$ 16,524.00$ 20,655.00$ 26,851.50$ 37,036.65$
40,740.31$ 44,814.35Wages and benefits$ 68,850.00$
93,636.00$ 130,815.00$ 187,960.50$ 185,183.25$
203,701.57$ 224,071.73Total operating profit$ 83,157.10$
90,978.00$ 101,261.30$ 130,762.70$ 86,329.22$
96,205.67$ 106,390.74Interest expense$ 9,906.53$
8,259.62$ 6,527.69$ 6,154.79$ 51,985.66$ 46,145.66$
40,225.66Income before taxes$ 73,250.57$ 82,718.38$
94,733.61$ 124,607.91$ 34,343.57$ 50,060.01$
66,165.08Income taxes$ 29,300.23$ 33,087.35$ 37,893.45$
49,843.17$ 13,737.43$ 20,024.00$ 26,466.03Net Income$
43,950.34$ 49,631.03$ 56,840.17$ 74,764.75$ 20,606.14$
30,036.00$ 39,699.05Statement of Retained Earnings
(Unaudited)(for years ending September
1)20122013201420152016F2017F2018FBeginning retained
earnings$ 39,506.00$ 83,456.34$ 133,087.37$
189,927.54$ 264,692.29$ 285,298.43$ 315,334.43Add: Net
Income43,950.3449,631.0356,840.1774,764.7520,606.1430,036.
0039,699.05Ending retained earnings$ 83,456.34$
133,087.37$ 189,927.54$ 264,692.29$ 285,298.43$
315,334.43$ 355,033.48Balance Sheet (Unaudited)(as at
September
1)20122013201420152016F2017F2018FASSETSCurrent
Assets:Cash$ 83,908.08$ 73,963.91$ 71,971.28$
95,208.03$ 99,185.71$ 123,227.31$ 142,351.85Accounts

6. Receivable$ 82,620.00$ 99,144.00$ 123,930.00$
161,109.00$ 222,219.90$ 244,441.89$
268,886.08Inventory$ 59,670.00$ 82,620.00$ 106,717.50$
143,208.00$ 185,183.25$ 176,541.37$ 179,257.39Prepaid
expenses$ 12,341.00$ 13,528.00$ 13,459.00$ 13,002.00$
13,000.00$ 13,250.00$ 13,500.00Total Current Assets$
238,539.08$ 269,255.91$ 316,077.78$ 412,527.03$
519,588.86$ 557,460.57$ 603,995.32Fixed Assets:Computer
hardware & software$ 17,190.00$ 17,190.00$ 18,060.00$
18,060.00$ 18,060.00$ 18,060.00$ 18,060.00Furniture &
fixtures$ 11,688.00$ 26,662.00$ 30,521.00$ 30,521.00$
40,000.00$ 40,000.00$ 40,000.00Signage$ 9,545.00$
10,000.00$ 10,000.00$ 12,000.00$ 20,000.00$ 20,000.00$
20,000.00Real Estate$ 225,296.00$ 225,296.00$
225,296.00$ 225,296.00$ 725,297.00$ 725,297.00$
725,297.00Total Fixed Assets (cost)$ 263,719.00$
279,148.00$ 283,877.00$ 285,877.00$ 803,357.00$
803,357.00$ 803,357.00Less: Accumulated depreciation$
98,398.00$ 126,312.80$ 154,700.50$ 183,193.00$
263,528.70$ 343,864.40$ 424,200.10Net fixed assets$
165,321.00$ 152,835.20$ 129,176.50$ 102,684.00$
539,828.30$ 459,492.60$ 379,156.90TOTAL ASSETS$
403,860.08$ 422,091.11$ 445,254.28$ 515,211.03$
1,059,417.16$ 1,016,953.17$
983,152.22LIABILITIESCurrent Liabilities:Operating line of
credit ($40,000 limit)$ 26,736.00$ 34,442.00$ 36,000.00$
40,000.00$ 35,000.00$ 35,000.00$ 35,000.00Accounts
Payable$ 19,503.00$ 19,500.00$ 20,150.00$ 22,000.00$
22,500.00$ 23,000.00$ 23,500.00Current Portion of Long
Term Debt$ 35,755.00$ 32,407.00$ 28,929.00$ 22,200.00$
72,500.00$ 72,000.00$ 70,000.00Total Current Liabilities$
81,994.00$ 86,349.00$ 85,079.00$ 84,200.00$
130,000.00$ 130,000.00$ 128,500.00Long Term
Liabilities:Term Bank Loans$ 140,986.74$ 105,231.74$
72,824.74$ 68,895.74$ 546,695.74$ 474,195.74$
402,195.74Deferred Income Taxes$ 13,387.00$ 13,387.00$

7. 13,387.00$ 13,387.00$ 13,387.00$ 13,387.00$
13,387.00Total Long Term Liabilities$ 154,373.74$
118,618.74$ 86,211.74$ 82,282.74$ 560,082.74$
487,582.74$ 415,582.74TOTAL LIABILITIES$ 236,367.74$
204,967.74$ 171,290.74$ 166,482.74$ 690,082.74$
617,582.74$ 544,082.74Shareholder's EquityShare Capital$
84,036.00$ 84,036.00$ 84,036.00$ 84,036.00$ 84,036.00$
84,036.00$ 84,036.00Retained Earnings$ 83,456.34$
133,087.37$ 189,927.54$ 264,692.29$ 285,298.43$
315,334.43$ 355,033.48Total Shareholder's Equity$
167,492.34$ 217,123.37$ 273,963.54$ 348,728.29$
369,334.43$ 399,370.43$ 439,069.48TOTAL LIABILITIES
AND SHAREHOLDER'S EQUITY$ 403,860.08$ 422,091.11$
445,254.28$ 515,211.03$ 1,059,417.17$ 1,016,953.17$
983,152.22Statement of Cash Flows(for the year ending
September
1)2013201420152016F2017F2018FOPERATIONS:Net Income$
49,631.03$ 56,840.17$ 74,764.75$ 20,606.14$ 30,036.00$
39,699.05Adjustments to Cash Basis:Depreciation$ 27,914.80$
28,387.70$ 28,492.50$ 80,335.70$ 80,335.70$
80,335.70Accounts Receivable$ (16,524.00)$ (24,786.00)$
(37,179.00)$ (61,110.90)$ (22,221.99)$
(24,444.19)Inventory$ (22,950.00)$ (24,097.50)$
(36,490.50)$ (41,975.25)$ 8,641.88$ (2,716.02)Prepaid
Expenses$ (1,187.00)$ 69.00$ 457.00$ 2.00$ (250.00)$
(250.00)Accounts Payable$ (3.00)$ 650.00$ 1,850.00$
500.00$ 500.00$ 500.00Deferred Income taxes$ - 0$ - 0$
- 0$ - 0$ - 0$ - 0$ (12,749.20)$ (19,776.80)$
(42,870.00)$ (22,248.45)$ 67,005.60$ 53,425.49Net Cash
Flow From Operations$ 36,881.83$ 37,063.37$ 31,894.75$
(1,642.31)$ 97,041.60$ 93,124.54FINANCING
ACTIVITIESOperating Line of Credit$ 7,706.00$ 1,558.00$
4,000.00$ (5,000.00)$ - 0$ - 0Current Portion of Long Term
Debt$ (3,348.00)$ (3,478.00)$ (6,729.00)$ 50,300.00$
(500.00)$ (2,000.00)Term Bank Loans$ (35,755.00)$
(32,407.00)$ (3,929.00)$ 477,800.00$ (72,500.00)$

8. (72,000.00)Net Cash Flow From Financing Activities$
(31,397.00)$ (34,327.00)$ (6,658.00)$ 523,100.00$
(73,000.00)$ (74,000.00)INVESTING ACTIVITIESFixed
Assets$ (15,429.00)$ (4,729.00)$ (2,000.00)$
(517,480.00)$ - 0$ - 0Net Cash Flow$ (9,944.17)$
(1,992.63)$ 23,236.75$ 3,977.69$ 24,041.60$
19,124.54Beginning Cash$ 83,908.08$ 73,963.91$
71,971.28$ 95,208.03$ 99,185.71$ 123,227.31Ending Cash$
73,963.91$ 71,971.28$ 95,208.03$ 99,185.71$
123,227.31$ 142,351.85
Agricultural Loan Analysis
Bobby Carnley – Regional Lending Manager
Kyle Eagerton – Principal Credit Analyst
September 20, 2016
We know Ag. We love Ag. We Are Ag.
Farm Credit of Florida
2
www.farmcreditfl.com
Liquidity
Current ratio - range desirable > 1.15 (FCF)
Working capital
Working capital/gross revenues ratio

9. Solvency
Debt/asset ratio
Equity/asset ratio - range desirable > 0.4 (FCF)
Debt/equity ratio
Profitability
Net farm income
Rate of return on farm assets
Rate of return on farm equity
Operating profit margin
EBITDA
Farm Financial Ratios and Guidelines
Farm Financial Ratios and Guidelines
4
Repayment Capacity
Capital debt repayment capacity
Capital debt repayment margin
Replacement margin
Term debt coverage ratio - range desirable > 1.25 (FCF)
Replacement Margin Coverage Ratio
Financial Efficiency
Asset turnover ratio
Operating expense ratio
Depreciation expense ratio
Interest expense ratio
Net farm income ratio

10. Farm Financial Standards Council
Farm Financial Ratios and Guidelines
5
How do we apply these ratios and guidelines?
The five C’s of credit are generally the guiding principles of
credit analysis:
Character
Conditions
Capital
Capacity
Collateral
The 5 C’s of Credit
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Character (Primary Lending Factor):
Credit Scores – one of the best indicators of future performance
is past performance
Reputation – an applicant’s favorable reputation in the business
community is critical
Experience – can applicant manage the business they are
wanting to finance
Legal Structure – what is the ownership structure of the
borrowing entity
Succession – is the borrower looking ahead with a defined
succession plan
Conditions (Industry):
What is the condition of the industry that provides the majority
of the applicant’s income – current & future outlook
What is the condition of the industry that the applicant wants to

11. finance – current and future outlook
Applicant should take the initiative in explaining why the loan
request is constructive for applicant & lender
What programs are available to support the applicant’s primary
industry – USDA, ASCS, FSA, tax credits, etc.
The 5 C’s of Credit
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Capital (Financial Position):
Does applicant have strong equity or are they highly leveraged
– attitude toward debt – prefer over 40% equity
Does applicant have a strong liquidity position – can they
continue to perform in the event of adversity – cash is king –
prefer at least a 1.15:1 current ratio
Are applicant’s debts properly structured – does repayment
match depreciation
Are debts constructive – Any killer toys
What is the applicants financial trend – positive, negative or
stable
Quality of financial information – compiled, reviewed, audited -
good quality information is critical for managing a business
Frequency of information provided – applicant can’t properly
manage a rapidly changing business with annual financials and
tax returns.
Financial analysis is an area that can be more or less
complicated based on applicant’s ownership structure. For tax
planning, estate planning and other reasons, complicated
ownership structures are becoming more and more common.
Financial analysis typically only includes those assets &
income sources that are owned & controlled by parties liable on
the loan. Some examples are as follows:
Applicant is married and spouse is not party to the loan, we do

12. not show any values for jointly held assets, but show all jointly
held liabilities
Assets have been moved into a legal entity (trust, LLC,
Partnership). These are handled on a case by case basis
depending on ownership, control, history
The 5 C’s of Credit
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Capacity (Ability to Repay):
Typically want at least a 1.25 coverage
What is the trend – positive, negative, stable
Is applicant heavily dependent upon new sources/ projections –
proven or unproven income
Does applicant have multiple sources or only one source of
income
Are applicant’s projections reasonable – supported by historical
information
How much adversity can they withstand – typically use 5-5-3
stress test or break-even analysis
Collateral (If All Else Fails):
Is the collateral highly specialized – highly depreciable
How liquid is the collateral
Is the collateral marketable in normal conditions
What is applicant’s commitment to the collateral
What is the income producing capacity of the collateral
Are there any environmental concerns
Realities of Agricultural Lending
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Can be more of an art than a science

13. Credit standards reflect precise values, but they are derived
from imprecise numbers
The financial trend is rarely consistent – wide swings in prices
and yields
Most operations are constantly changing – difficult to project
Many applications are for new ventures with no historical trend
Applicants rarely have a written business plan
Financial information
is typically not high quality/complete
is typically dated – prefer within 6 months
cash basis vs. modified cash basis vs. accrual
cost vs. fair market value
We realize that a borrower may be weaker in some areas than
desired, but we do consider compensating strengths.
Considering all of the credit factors, we have to determine if the
credit is safe and sound.
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Real World Example:
Albert & Alberta Angus, LLC
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Albert & Alberta Angus Farms, LLC is requesting a loan to
finance 75% of the purchase price of a $200,000 piece of

14. equipment.
Take a look a the financials we have provided. What are some
questions you might ask? What kind of information should you
look for?
We know Ag. We love Ag. We Are Ag.
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