Growing in the New Season: Custom Financial Structures with Trent Cossey

[00:00:08.250] - Chris Griffin
Welcome to Back to Your Roots, a podcast that provides insight into all things farming, financing and farm life guiding you back to your roots.

[00:00:17.550] - Chris Griffin
Thanks for joining us today on Back to Your Roots. I'm your host, Chris Griffin.

[00:00:21.320] - Jordan Turnage
Hey, guys, I'm Jordan Turage. Today we've got Mr. Trent Cossey in here. He's a relationship manager for River Valley AgCredit in our Murray branch. And today's topic with having Trent in here is we're going to talk about the renewal season that we have. But Trent, thanks for coming in. And before we get into the rigmarole of what all goes into doing the renewal season, kind of just give us a little bit of a background about yourself.

[00:00:44.290] - Trent Cossey
Sure. Like you guys said from the Murray branch, I'm born and raised Calloway county, grew up there, went on a little hobby farm. Like most western Kentucky farms or families we had a little bit of tobacco in the early 90s, got out of that and transitioned from tobacco to hay production and then cattle.  Did that, have some other family that do some row crop operations and got some experience with some friends and hog operations, things like that. So I got to experience a lot of agriculture growing up. I'm from the area went to Murray State got an ag degree.  Jumped out and did some grain merchandising after college with ADM Grain, did some of that stuff, then a little commercial banking. And then 2019 got to come over here on the analyst side for River Valley, which was a huge benefit to me as a lender because I got to see just about every operation we work with, whether it's poultry, produce. We got some dairy operations down in Tennessee and some different things, and then transition to lending in 21. So this will be my third renewal season on the lending side, but fifth renewal season with River Valley.

[00:02:01.230] - Jordan Turnage
Got you.

[00:02:01.940] - Chris Griffin
I'm sure that time in the analyst department was super vital because I learned a lot. So it makes your job not, I would necessarily say, easier, but you kind of know what they're going to need and what they ask for on the front end.

[00:02:15.290] - Trent Cossey
I tell you, it's probably one of the bigger benefits to me. I think especially when I get in with the credit department, they're going to look for certain things. And the more I know kind of how to tailor my renewals and stuff like that to that, to answer those questions that they have on the front, right on the front side of it, the smoother everything goes. And that's not just renewals. That's with new loans, every loan. That's the biggest thing is when I started, it was me, Logan, and one other analyst in the department. And so we got direct learning from him on that. And then Kip came along as the CCO and got to learn more from him. Having that direct call to them is great to be able to tailor a lot of stuff to my customers.

[00:03:12.260] - Jordan Turnage
It helps out with efficiency to get stuff in, get stuff out right.

[00:03:15.870] - Chris Griffin
I always say it's always about connecting the dots and telling the story. The better you can tell the story and the less dots they have to connect and figure out, the better most of the time.

[00:03:27.250] - Jordan Turnage
Because we as loan officers, for the most part, especially fresh coming in, we kind of think they know what's going on. But we really need to give our analyst department the big picture of things to really help them understand. And the more information that we can provide as loan officers to the analyst, it's going to make a cleaner analysis package for narratives. Credit packages returned back to us, help that turnover time cut down and at the end of the game, making sure our customers are taken care of as quick as we can. Because you've seen it on both sides. Now there's not, and this being your third year in lending, fifth year overall with the association, you know, just like we all do here in the room, that there's never going to be a loan that you touch the same way twice.

[00:04:16.970] - Trent Cossey
Right.

[00:04:17.830] - Jordan Turnage
You talk about everything being tailor made. We've kind of stressed that in previous podcasts. Every opportunity that we get is unique. And it's us as loan officers to get as much information on the front end to help the analysts on the back end. That way we can get it done as quick as we can. Because even a lot of the same ones, even with renewals, things change, right? It's always a moving target.

[00:04:37.750] - Trent Cossey
That's the thing, year to year, there's constant changes in operations.

[00:04:44.650] - Jordan Turnage
What we've had to deal with in the past couple years.

[00:04:45.640] - Trent Cossey
Even some more now, it's not even just changes in operations, it's changing in the ag economy, the market itself, or even just things that happen that are outside of their control that are going to weigh in one way or the other. It's just identifying those things and being able to either mitigate those risks or just speak to them and kind of say, hey, this is how they're getting past that or this is what they're doing. Those are huge factors that just make the process so much smoother.

[00:05:19.490] - Chris Griffin
The question I'm getting ready to ask, it kind of plays in. I had a lender that does home loans, that I'm good for, friends with, and he was like, hey, I would assume that you're really busy right now. And I'm like, well, I'm busy. I'm not quite as busy as some of the other ones, but I do have some renewals. And he's like, what in the world are renewals? So I think that's the million dollar question when people are outside of agriculture. I mean, when I came in, I didn't really have a background in ag, my lending background was a little bit different. So I was like, my first renewal season, I was like, oh my gosh, what exactly is..

[00:05:46.990] - Trent Cossey
Baptism by fire.

[00:05:48.040] - Chris Griffin
So last year I was just thrown into the fire. And so for the listeners out there, just explain what renewal season is. What does it look like for you and what does it mean for our farmers?

[00:05:58.460] - Trent Cossey
I mean, renewal season, a mixed bag, really, but typically starts right after kind of the first of the year. I have a few renewals. I know there's some down in Tennessee that are like January 1, they got to be done. And so you're really talking to those people in December because that's really the process. But really the true heart of renewal season is kind of somewhere probably really march to about May is like the, that's the big time. And if you think about it, to put renewal in a layman's word, we were just talking right before the podcast. We were talking about age. The closer we all get to getting up there, we're going to have to start hitting the doctor a little sooner, a little bit more frequently. That's really what it is. It's a checkup. It is straight up, how did last year go? Let's talk about stress points. Let's talk about good things. Let's talk about how well you did. Let's talk about what we can do with that. And then there's times where it's tough conversations and it's like, hey, we didn't do so well last year. What do we have to do to make next year better?

[00:07:06.260] - Trent Cossey
So renewal season is, it is really a checkup with either the borrower with the loan officer or the loan officer with the borrower to where you sit down and you really go through and you say, okay, how are we doing? What's going to happen next year or what do we hope happens next year? How do we fix issues or whatever? So it's a checkup, but it's a good time. I mean, it's a great time for me to sit down and just talk to my customers.

[00:07:34.580] - Chris Griffin
So explain to the listeners, when you say renewal, what type of loan are you renewing typically? Because I know when I talk to people outside of ag, they're like, wait, line of credit? What is that? And I'm like, well, they've got to buy the inputs. And I said, a lot of times they just don't have that money sitting there.

[00:07:51.500] - Trent Cossey
Right. Like you said, it's operating line of credit. So we offer a revolving operating line of credit or a non revolving operating line of credit. Operating line. Revolving, which is the most common for an active operation. Okay. What that is like you said. Exactly. They've got to be able to buy like row crop operations. I would say your operations, farming so many times is the payback is different than me and you on the w two side. They don't get that check every two weeks, you know what I mean? So they may not get their money until December, but they've got to put the crop in the ground in March, April, May. And so an operating line is there for them to bridge the gap between planning or the beginning of that cycle to whenever they're going to get paid. And it's different for different operations, poultry operations, sometimes they don't need as large of an operating line because they're getting their assignment checks or their checks a little bit more or every grow a little bit more frequently. Cattle operations are a little bit more frequent because they're getting their money whenever they sell the cows and stuff like that.

[00:09:05.540] - Trent Cossey
So it's not cut and dry. But the operating line is essential for a lot of operations. Especially we got some guys that, sure they can operate cash, but those guys right there ain't none of them our age sitting there doing it. They're guys, they've already hit their stagnant years in a sense to where they've got their operation the way it needs to be. And they're good. And then you got guys that are probably closer to our age that are in their growth stage and they got to have

[00:09:35.860] - Chris Griffin
They don't have that capital.

[00:09:37.410] - Trent Cossey
They don't have that capital. And so they've got to have that to move forward and continue to grow. And that's where a lot of that comes into play.

[00:09:44.000] - Jordan Turnage
And I feel like another big point that we make on that, too, is that it's beneficial for the guys to, with having the prepaid set up to go ahead and get in there, purchase early. A lot of the ag distributors out there, your seed vendors, fertilizer, especially chemical, they give early discounts by purchasing things early. And that's a benefit to the farmers as well. So that's the one big thing for us to make sure that they've got that ready to go set up for the start of the year. That way they can take advantage of those discounts. And if they don't have the capital, that's where the revolving line comes into play. I know a lot of guys in November, December, that's when you'll start seeing them come in and taking out draws from the line of credit to help pay towards that prepaid to help them out to go into the next crop year.

[00:10:27.180] - Trent Cossey
Right. They may come in and pay their line of credit off, but then in about a month, they'll come out and they'll draw out half a million dollars because they're buying for next year. And that is 100% right. I mean, that's what it's there for. You talk to some of the guys coming in even ten years ago or something like that, and they would say ag was so even more different than what it is today. There were set times a year you may not have had those discounts at the time. Just like the global economy, agriculture is always changing and the way that it's really more year round than what it used to be.

[00:11:04.550] - Jordan Turnage
A lot of guys, you get on the combine with them, they're already thinking about the next year's crop at the start of harvest of the current one that they're in, because that's the market that they're in right now. And to get ahead of those discounts, as expensive as it cost, our input costs are right now, they've got to find a way.

[00:11:26.680] - Trent Cossey
Well, not only do you have to buy early, you've got to market early. That's the thing.

[00:11:32.820] - Jordan Turnage
And hope you do it right.

[00:11:36.430] - Trent Cossey
You got guys who were marketing their grain for this coming year, like you said in a combine last October, and you got to think that's crazy to think that they're already planning for that next year. But that's almost what you got to do. When grain prices are what they are, they have fallen off in the last year quite a bit. You've got to kind of make those adjustments and make those plans.

[00:12:02.400] - Jordan Turnage
You got to ratchet strap stuff in.

[00:12:06.950] - Trent Cossey
You're already planning. You're right. You're already planning for next year. By, if you're not thinking about it really in the combine, then really what are you know?

[00:12:15.660] - Jordan Turnage
Because we got a lot of know. I don't know as much as far as Tennessee's east side, but I know here in West Kentucky we've got a lot of borrowers sitting on a lot of grain right now.

[00:12:25.120] - Trent Cossey
Oh, yeah.

[00:12:25.680] - Jordan Turnage
And that plays a big part when it comes to doing these lines of credit.

[00:12:30.610] - Trent Cossey
That's probably one of the questions I get from some of my customers so many times. That's part of my grain merchandising background, looking at the markets, buying grain and stuff like that. That's something I still kind of look at and try to stay on top of because I get that question all the time. What do you think about it? What's the market is going to look like or what's your idea? And you try to give them the best advice you can. But yeah, you're right, there is a ton of grain sitting in the bin right now because they're waiting for that right time. They're waiting for that right time, maybe a little bit waiting on that right price. And hopefully most of them have paid their, the hope is everybody's paid up and you're marketing what you've got left over.

[00:13:17.100] - Jordan Turnage
Most folks are sitting there on go.

[00:13:19.650] - Trent Cossey
Right.

[00:13:20.530] - Jordan Turnage
But we do have some of those guys that we kind of have to talk about the liability of things too, when we have those conversations on the front end of when we start to do these renewals for lines of credit, because that's one of the big questions that we ask. How much grain you got in the bin right now? And then we try to forecast that as conservative as we can to help them as far as future projections. So going into that, let's kind of talk about the different types of operating lines of credit.

[00:13:49.180] - Trent Cossey
Basically, like I said earlier, there's non revolving and then revolving line of credits. Non revolving lines, really, those are really construction lines. There's a set purpose behind it. There's a set time frame. Once you pull money out, even if you pay it back, you can't pull it back out again. So it's really there for kind of a set purpose. So when we're talking renewal season, we don't really go on there, but it is an operating line that we do offer. So the main one is revolving lines of credit. So like I said, a borrower can pay on it and then has that money to pull back out. As far as time frame goes, we can go from the most typical is probably a twelve month operating line. But then some of the more seasoned customers or customers we're comfortable with, we've kind of weathered a few storms with them. We've kind of seen how they operate. We'll offer a little longer term, like a 24 or a 36 month is the max. And it's just one of those things where it's not that we just are like, oh, we're not going to have to deal with them for 36 months.

[00:14:54.610] - Trent Cossey
We still meet with them annually.

[00:14:56.920] - Chris Griffin
Yes.

[00:14:59.150] - Trent Cossey
Financials and tax returns. It's just we don't have to send them through credit desk and send them up as an actual loan request for that time frame. So that's kind of the gist of it, is the revolving line, as they'll have a max amount that they can draw, and then they pull that out. Even if they max it out, we're okay with that as long as we see it pay down. Typically, unless there's kind of like a situation this year where it made sense to hold the grain at a certain point in time, but there's enough grain or enough assets to pay off the line of credit. We know that.

[00:15:37.680] - Jordan Turnage
Or offset liabilities.

[00:15:38.640] - Trent Cossey
Or offset the liabilities. Yeah. But most of the time, we want to see that revolve down to $5, and then they can turn around and pull it back out and go from there. So it is supposed to be revolving. It's not supposed to just pull out half a million dollars and then let that sucker set.

[00:15:56.080] - Chris Griffin
Yeah, my portfolio is just. I mean, I deal with some of the smaller full-time farmers and then hobby farmers and things like that. So I think what people need to realize is it's not just, hey, I'm a full time farmer. I mean, you may own a hunting property that needs to plant corn for the upcoming duck season.

[00:16:10.850] - Trent Cossey
Right.

[00:16:11.180] - Speaker 2
You can use a line of credit. I mean, if it's ag real estate, I've had people that literally, they might just have three headed. I mean, literally nothing. I mean, they have just a few things that they just do on the side because they like to piddle, and they might have a $15,000 line of credit with us. It doesn't have to be a million dollar or a huge operation, and we do it from the small to the biggest.

[00:16:31.690] - Trent Cossey
I've seen operating lines for $5,000 all the way up to multimillion dollar. You're right. It is all shapes and sizes, and it's there to fit their operation. We get so much variety in ag in this territory between equine and cattle, dairy, produce, row crop, poultry, hog. I mean, all this stuff. We encompass so many different ways that we touch agriculture that it's definitely one of those things where there's a lot of flexibility to it. Yeah.

[00:17:05.130] - Jordan Turnage
It's not just us. You bring us your tax returns, and we cut you a check.

[00:17:09.260] - Trent Cossey
Right.

[00:17:10.330] - Jordan Turnage
It's a walking relationship. It's building a track record with us because we want to have a performance review with those borrowers. And that's kind of why we do that one year at a time for folks. I know a lot of the younger guys, I would say that's in our age gap, in our mid to late 30s in here, that our guys are.

[00:17:27.840] - Trent Cossey
Hey, don't get too specific now.

[00:17:30.110] - Jordan Turnage
Hey, I could have been really specific. And you said early. I can say early because I'm 34.

[00:17:34.760] - Trent Cossey
You could have.

[00:17:35.350] - Chris Griffin
I'm the only one that doesn't have any hair, though, so that's good.

[00:17:38.690] - Trent Cossey
Nobody sees that.

[00:17:41.250] - Trent Cossey
You put that out there for world.

[00:17:42.440] - Chris Griffin
My pictures everywhere. Can't hide it now.

[00:17:45.170] - Trent Cossey
Well, that's true.

[00:17:46.020] - Jordan Turnage
I mean, some people age like wine and some people age like milk.

[00:17:47.520] - Chris Griffin
My hair did not age like wine, that's for sure.

[00:17:52.470] - Jordan Turnage
But just kind of like we were talking about, our goal as loan officers is to get volume. Yes. And to keep our bosses happy and generate income because we're a member owned institution and as an association. But at the end of the day, we don't want to just say, hey, here's half a million dollars, good luck. We'll see you next spring.

[00:18:15.930] - Trent Cossey
Right.

[00:18:16.380] - Jordan Turnage
And we don't want to see our guys lose their shirts and anything.

[00:18:20.130] - Trent Cossey
There's so much communication. And that's what I would stress to anybody. It doesn't matter who your loan officer is as a borrower, be open with your loan officer, your relationship manager. Because the more we know, and the more we know even the bad stuff, if you're not having a great year, let us know. I've seen so many situations where, realistically, with my commercial bank experience, stuff like that, they would have got kicked to the curb and we'll bend over backwards trying to make sure it works, because that's what we ultimately want to see the future of farming continue.

[00:19:05.100] - Jordan Turnage
And we want to see folks, of course, in a perfect world, we want everybody to come in and pay their loan down to $5. But that doesn't always happen.

[00:19:13.360] - Trent Cossey
Right?

[00:19:13.700] - Jordan Turnage
And I think that kind of makes a difference between us and some lending institutions is that we're willing to work with these guys.

[00:19:19.060] - Trent Cossey
100%

[00:19:19.760] - Jordan Turnage
And roll some money that's over in that note, over into the new one to kind of help them float from year to next.

[00:19:29.510] - Trent Cossey
Right. Yes, sir. That is.

[00:19:30.870] - Chris Griffin
Well, that's where I think sometimes some of our borrowers, some of the members I have, they're like, why are you asking for this? Why are you asking for that? And it's not really us questioning them I think it's just making sure, hey, before we lend you more money, we just want to make sure that I'm not putting you in a poor position, that maybe the borrower, like you said, I think that relationship and us not only wanting to do the business, but also wanting to protect the borrower and make sure they're on solid footing. As a former analyst, and I know our analyst department is pretty jampacked right now about how many renewals do you think on a typical year kind of comes through the analyst department and gets closed, do you think?

[00:20:13.090] - Trent Cossey
Obviously it's going to vary year to year, but somewhere it's a couple of hundred each year. Kind of what I figured. I don't know the exact number, but I would say it's a couple of hundred between. And some of those don't hit the analyst department. Some of them, but there are quite a few of them that do. And just the vast range of things that they have to go from one renewal to the next is a lot because you kind of have to treat them a little different. You got to treat the guys who only need a couple of hundred thousand dollars or $50,000 different than you do the guys who need two or $3 million. There's some big asks out there as far as operating money. Like you said, the questions that you ask, the needs and stuff like that, it varies. But at the same time it's all necessary for us to see where we need to go with it.

[00:21:14.780] - Chris Griffin
Because even from a line of credit perspective, I mean, we can do open note. If the borrower's net worth is high enough.

[00:21:21.070] - Trent Cossey
100%

[00:21:21.800] - Chris Griffin
We can do open note and we can tie it to a piece of property that they have, a piece of equipment they have.

[00:21:28.080] - Trent Cossey
Crops.

[00:21:28.710] - Chris Griffin
Crops, whatever that is. It varies from all over across the board.

[00:21:33.760] - Trent Cossey
Yeah, there's different structures, different things out there we can tailor it really to. And that's helpful, I think not just to, that's helpful to us, but it's also helpful to the borrower because not every borrower out there has 1,000 acres free and clear that they can set up. We can get the equity off of that. We might have to get creative when it comes to collateral and things like that, but I think that's a benefit to the borrower is that we're willing to take those steps to do that so that they can still operate.

[00:22:09.930] - Chris Griffin
Well, one thing you might be able to explain to the listeners, you're talking about crops getting used as collateral as well. Can you just kind of just quickly explain perfected and unperfected crop lien, because I think that'd be a good teaching point so people know what that is.

[00:22:21.740] - Trent Cossey
So a perfected crop lien or perfected, unperfected just means basically how we treat the collateral value. Perfected crop lien. We're going to look at the 100% of the projected gross crop value. Okay. So when we look at how many acres you're going to plant and the price that you've got it at or whatever, we're going to take that value and say, okay, that's what we're going to take an assignment of that amount.

[00:22:47.460] - Chris Griffin
But we're going to be on that check.

[00:22:48.880] - Trent Cossey
Right. But our name is going to be on your check and we're going to be on your crop insurance check.

[00:22:52.730] - Chris Griffin
There you go.

[00:22:53.130] - Trent Cossey
There you go. That's the two things. On the unperfected, we look at about 50% of the value and we're not on the check. So we're saying, hey, just

[00:23:02.670] - Chris Griffin
A little more risk for us, but we're only giving them 50% of the value so.

[00:23:07.470] - Trent Cossey
We still file a UCC. So it still shows that we have a lien out there. It's just we don't have to be on the check.

[00:23:13.900] - Chris Griffin
We don't send that out to the graineries and make them write the check with us on it.

[00:23:18.400] - Trent Cossey
And we can do perfected crop liens, not just on crops, we can do it on cattle. So I mean, there is some variety there on that, but we can do it on a couple of different things besides just your row crops. Okay.

[00:23:32.870] - Jordan Turnage
I think one thing we want to kind of go back on is when we were talking about operating lines of credit, sometimes we talked about as far as construction, I want to be in a non revolving, but I'm sure in your portfolio, I have some in mind too, that some borrowers just have them set up as a line of credit in case they have a chance to get a piece of property, a piece of equipment, a capital purchase. That's what we call those. I just kind of want to kind of expand on that.

[00:24:00.530] - Trent Cossey
Right. So, yeah, time to time, you get a borrower that they're going to go to an auction, whether it's a real estate auction or equipment auction, or they just want to have the ability, there's a piece of property out there and they know, especially in today's market, they've pretty much got to pull the trigger when they talk to the person. So we will allow borrowers to go in and use their operating line to make large purchases like that on the short term. So that they can get the seller their money and kind of get it off that, and then it allows us the time that we need to get the term loan funded and all that because, I mean, like, with a piece of real estate, you got title work, appraisals, all that fun. Yeah, you throw a survey in there, you're talking 30, 60 days, and sometimes you don't have that time to get the borrower or the seller their money. Now, the caveat with that is, hey, we need to know that going ahead, you don't need to walk in. We don't encourage the borrowers to walk in after the fact and say, well, I bought a million dollars worth of property.

[00:25:12.640] - Trent Cossey
Okay, that's going to be a problem. But if you give us a little bit of a heads up that, hey, I'm thinking about going to this auction, or, hey, I'm thinking about buying this property.

[00:25:22.550] - Jordan Turnage
The same for tractors, too, right?

[00:25:24.010] - Trent Cossey
Yeah.

[00:25:24.360] - Chris Griffin
Actually just had that.

[00:25:25.290] - Speaker 2
I just did an equipment loan. They took the money out. We already talked about it.

[00:25:28.890] - Trent Cossey
Sure.

[00:25:29.110] - Chris Griffin
Went and paid the seller, and then we got their equipment loan closed in three or four days on AgScore, and they got that and basically paid the credit back down.

[00:25:37.770] - Trent Cossey
A lot of times. The biggest thing is, if it's a significant purchase or something like that, we'll let credit desk know ahead of time so that they're comfortable with it as well. So we don't do it for everybody.

[00:25:52.640] - Speaker 2
That's where the open communication comes in.

[00:25:54.230] - Trent Cossey
Yeah, I wouldn't say we'll do it for every line that we have out there, but there's a lot of them that are long time customers with us that they do it all the time.

[00:26:05.440] - Jordan Turnage
I think it would be a disservice if we don't. We're talking about renewal season. It's kind of on the tail end of it, too, but I feel like it's a big point for us to just kind of talk about what does a farmer need to bring us in order for us to properly set up their line of credit renewal?

[00:26:24.080] - Chris Griffin
Loaded question, right? I always love this. I'm like, well, it depends on the loan amount. Depends on if it's AgScore.

[00:26:31.200] - Trent Cossey
You're right. I'll give you a general what I encourage people to bring, but you're right. There's situational stuff that you're never going to know until you sit down with them and go, okay, well, we're going to need something. Depending on the time of year, let's say at least two to three years of tax returns. I would encourage the most recent tax return if they're done now. I mean, if you're like me and probably some of the rest of the country out there, you still hadn't got your 23 taxes done yet, so that's not uncommon. You got till the April 15, so we're not going to scream at you.

[00:27:11.440] - Jordan Turnage
March 1 for farmers.

[00:27:12.800] - Trent Cossey
Yes, that's true. So we do encourage the tax returns if we can, and then we usually do what we call a balance sheet or a financial position. Okay. And that's just us saying a snapshot in time. Hey, this is what you've got. Assets. This is what you've got. Liabilities. And that can be cash, 401K, crops in the bin, whatever. And we just go through equipment that you own, real estate, and then the liabilities are on the other side. And then the other thing would be a crop plan is a big thing, or a projection for that year, whether it's you're in cattle or row crops or whatever, we got to be able to sit there and say, okay, this is what we think they're going to do in 24, or this is where they're going to do that next year. So those are the big three that I would say that you want to bring to the table. Yeah. If you talk to Kip and Logan, they'll probably give you a lengthy list of things. But I would say, in general, if you brought those three in, that would be a great roadmap for us to start with and say, okay, hey, we need to go ahead and talk about this as well, or go from here.

[00:28:31.810] - Trent Cossey
But that kind of gets us started.

[00:28:34.630] - Chris Griffin
Well, kind of piggybacking on that. So when you're talking to a borrower, you're getting the stuff they need. Let's say they don't have a line of credit now and it's somebody that's coming in for a new one, typically, what are you looking at when you're trying to suggest to them the amount that they need?

[00:28:48.940] - Trent Cossey
Right.

[00:28:49.190] - Chris Griffin
And I know that also varies. Or if it's a current borrower that you have, and let's say they need to increase that line of credit. Like, what goes into that? When you're looking at that and analyzing it and trying to approve it.

[00:29:01.620] - Trent Cossey
I'll tell you the way I do it.

[00:29:02.750] - Chris Griffin
Okay.

[00:29:03.060] - Trent Cossey
And then you guys can say, well, that's a terrible way to do it, or, that's golden. I mean, however you want to roll with it.

[00:29:08.520] - Chris Griffin
Lets just say it's golden.

[00:29:10.920] - Trent Cossey
I don't know about that. So the best way to do that is to talk to them about, hopefully, unless it's their very first year. They don't have a schedule f. You talk to them basically about what their income and expenses. Okay. We don't typically want to have an operating line that exceeds their expenses. Okay, we'll match up to what they spend or whatever, but we don't really want to exceed that. We want to kind of be somewhere three quarters, two thirds, somewhere in that ballpark of their expenses. Because like with a row crop, I think Jordan mentioned it, sometimes you get those like Nutrien or the co-ops or stuff like that. They'll offer their lines as well.

[00:30:03.300] - Jordan Turnage
A lot of those guys, now your ag distributors are offering 0%.

[00:30:09.010] - Trent Cossey
Or 0% or really low interest rates for seed. And so they'll be able to use that to kind of buy some of their inputs and stuff like that, but they don't need all of it to come through River Valley. Now, interest rates get a little bit lower and they may choose to go through us for everything, and that's fine, too. But the trick is, yeah, you start out two thirds, three quarters of what their expenses are, and then you kind of assess needs. If that worked out that year, great. If you ended up having to get them a little bit more money through an additional advance, then you kind of regroup the next year and say, let's increase that line.

[00:30:54.550] - Jordan Turnage
Lets talk about that for a second too. We do additional advances for folks and that's to help kind of cover expenses outside of their operating line of credit. A lot of guys, it kind of goes back towards for folks that are wanting to do prepaids before they get into harvest season, too, we have a lot of guys like our bigger guys, they'll need AAs for purchase fuel, just any little thing that they need for their operation.

[00:31:17.060] - Trent Cossey
And they may run into additional expenses. Two years ago, when it was a lot drier summer than what we even had last year, you had a lot of irrigation and that cost a lot of extra money, a lot of fuel, a lot of extra money, a lot of utility bills. And so we had AAs just to cover some of the additional expenses that came across or for some pre buy stuff before they sell their crop. So there is some of that. That's why meeting annually and talking about those things is such an important deal to really say, okay, let's assess the needs. Let's talk about what happened last year. Was that a fluke or do you actually need additional money? But yeah, to answer the question, you start somewhere expenses down and kind of based off of how you talk to the customer, how cash heavy are they? Or something like that. And then you kind of go from there and you adjust as needs arise. If they pick up more ground, obviously they're probably going to need a little extra money on the row, crop side or something like that. Or if they buy another set of barns or something like that, or build new barns, they're going to need more money.

[00:32:31.650] - Trent Cossey
So you just kind of assess what they're doing. But the jumping off point is definitely the hardest you get. Guys, I had a guy who, he's been doing hay production, and we did just a $10,000 line, and then he comes back this year and he's like, hey, man, I need double that, which is $20,000, which is not that big of a deal.

[00:32:53.750] - Chris Griffin
You're like, well, let's look.

[00:32:55.380] - Trent Cossey
Yeah, let's talk about this. But it made sense. And schedule f's, especially if it's not their first year, schedule f's are great because they kind of give you some sort of indicator of where they were at the previous year, but if they don't have that, then it's a little.

[00:33:14.130] - Jordan Turnage
But it does, really give you a kind of litmus test as far as where they are, as far as spending their money.

[00:33:22.580] - Trent Cossey
Right? Yeah.

[00:33:23.480] - Jordan Turnage
And that could be good or bad. That's where figuring out how we're going to structure this renewal and making sure, and I'll make sure to tap on this for Kip and Logan, that we are well secured with collateral.

[00:33:38.550] - Trent Cossey
Yeah, we want to be well secured. Security is a big deal. I think you also have to assess their lifestyle.

[00:33:49.990] - Jordan Turnage
Oh, yeah.

[00:33:51.290] - Trent Cossey
Family living is a big number out there, and it varies from everybody. I've seen some where half a million dollars of family live don't even touch what they spend, really. And then I've seen it where guys will survive off of 20 grand. And that's the thing. It varies. You do have to assess that to a little bit. And I don't want to say that we're being judgy or nothing like that, but I mean, we're not necessarily saying, hey, don't do that unless it's causing stress to the operation but we do have to sometimes

[00:34:26.790] - Chris Griffin
Some people live a little higher on the hog.

[00:34:33.110] - Trent Cossey
Some people are a little bougier than others

[00:34:35.590] - Jordan Turnage
just by the means.

[00:34:36.560] - Trent Cossey
Yeah, that's right. But, yeah, you're never going to get it right the first time. And that's why we offer additional advances and stuff like that through the year. But you just kind of have to find your own little way to say, okay, this is the jump off point. And roll on.

[00:34:54.350] - Jordan Turnage
That's awesome. Well, guys and gals, I hope you learned something today about operating lines of credit here with River Valley AgCredit just to try to drive this point home. We try to make financing aspect for farmers as stress free as possible for y'all. And Trent, we appreciate you so much for coming in and we thank you so much and I'm gonna go ahead and wrap this up. And as always, thank you for listening to us on Back to Your Roots. For Chris, I'm Jordan. Thanks for listening.

[00:35:21.530] - Chris Griffin
Thanks for tuning in to Back to Your Roots where we dish the dirt on all things ag. Be sure to never miss an episode by following and subscribing while there. Leave us a review about what you want to hear next. Stay in the know between episodes by following us on Facebook, Instagram, Twitter, LinkedIn and TikTok. For more resources go to our website at rivervalleagcredit.com.