| Lending & technology news you can use. Subscribe to our FREE monthly email newsletter here... |  |
Operating LoansOperating loans are used for people who need money to run a farming business. Operating loans must be available when the customer has the need. Providers of operating loans have to offer good interest rates and operating loans that are flexible to a specific operation. S uccessful lending organizations provide operating loans with some of the following rates and characteristics:30-day Variable Rate This operating loan rate is the most popular for financing operating loans. The operating loan interest rate is established every 30 days, based upon a variable cost of funds. The operating loan rate can change up or down depending upon economic conditions. This operating loan rate is easy to follow by watching movements in the U.S. Prime rate. LIBOR-Indexed Variable Rate This operating loan rate is relatively new to the marketplace and it frequently offers the very lowest rate available. LIBOR stands for London InterBank Offered Rate. With this operating loan product, your rate can move up or down every 30 days, depending on the movement of the LIBOR index. LIBOR offers savings and is a commonly recognized index that you can follow in the financial press. Prime-Indexed Variable Rate Many customers feel more comfortable with a variable rate operating loan indexed to the New York Prime rate. In this case, the interest rate can change monthly (up or down) with movements in the NY Prime. Customers have a specified margin above or below the Prime rate, and their operating loan rate changes with any change in the Prime rate. One-Year Fixed Rate This operating loan rate is fixed for 12 months then resets at the end of the year to a 30-day variable rate. The rate can be reset to another one-year fixed rate period. This operating loan product helps eliminate concerns of rising interest rates during the life of the operating loan. Weather and commodity prices can be unpredictable, but a fixed rate on an operating loan is a sure way to control interest costs. Operating loan funds are set up to meet expected annual operating costs. This might include crop needs, labor, family living expenses, livestock purchases or other farm-related needs. Maturity dates for operating loans are set to match the operation’s cash flow. Here are some other types of operating loans available in the marketplace today... Revolving Operating Loans The operating loan revolves in multiples based upon the maximum authorized amount. As a customer writes checks on the account, the revolving operating loan automatically covers the amounts. When they receive income and make deposits, the operating loan balance is reduced. Specific Operating Loans A specific operating loan is designated for the purchase of specific inventory and will be repaid in one year or less. Either a variable rate or a fixed rate is available for specific operating loans with the balance due at the end of the operating loan term. Cost Cutter Crop Input Loans For Farmers When farmers purchase crop inputs in the fall or winter they may not receive income from that crop for well over a year. With a repayment of up to 18 months, the Cost Cutter Crop Input Loan program allows farmers to purchase the inputs and repay the operating loan when they receive the income from next year’s crop. Qualifying purchases include fertilizer, seed, chemicals, custom application costs and other costs associated with crop inputs. These operating loans are available anytime during the year. Farmers can take up to 18 months or until March 31st of the following crop year to repay the operating loan. Fixed or floating loan interest rates are based on a one-year term with operating loan payments stretched up to 18 months. Whether the operating loan need is $10,000 or $1 million, Web Equity Manager® can process the operating loan application quickly and efficiently. Once an operating loan is established in the system, lenders can retain that financial information over time and use that information for other operating loans or other credit requests without having to "rekey" the information for each different operating loan request that comes along, even years later. Web Equity Manager® calculates a complete financial analysis on any loan type, from the simplest loan requests to the most complex agricultural and related small business credits utilizing the Farm Financial Standards Ratios and RMA Industry Comparisons. Credit bureau reports can be pulled from within the Web Equity Manager® system and lenders can include that information in their scoring and rating parameters. Web Equity Manager® also provides the Fair, Isaac LiquidCredit® analytic and decisioning service for small business lending, including the industry-leading Small Business Scoring ModelsSM (SBSSSM) functionality so lenders can quickly and confidently process loans up to $250,000 with little or no financial data. Click on the link below (or call ECI) to schedule a live online demonstration of Web Equity Manager® financial analysis capabilities today. 1-800-264-0787 ext. 200 | ECI Home Page Here ©
ECI | All Rights Reserved. |
