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Dollars and sense: Farm Credit Canada

Lending 101: tips for successfully partnering with your lender

December 9, 2014  By Shaun Humphries

When Gerard Schouwenaar, owner of Orchard Park Growers in St. Catharines, Ont., first approached lending institutions to expand his business in the late 1980s, he recalls it being a fairly informal process.

“It was a much smaller game back then with much smaller numbers. I don’t think we went into the bank with much more than a few scribbles written on one sheet of paper and it was a done deal,” says Schouwenaar, who started working in the business with his father in 1985. “That’s just the way it was done back then.”

Over the years, as his business grew, so did the attention he paid to his financial statements, business plan, and in turn, the relationship with his lenders.


“Having a strong track record and open communication with your lenders is so important when you’re looking to expand,” says Schouwenaar, whose present greenhouse area consists of 160,000 square feet and employs close to 25 people during peak seasons.

“But, for those just starting out, it’s all about having 100 per cent confidence in your plan, your numbers, and most importantly, yourself, when approaching a lender.”

According to Sophie Perreault, Farm Credit Canada’s (FCC) chief operating officer, that confidence Schouwenaar talks about is born out of solid preparation.

“Success in being approved for a business loan is all about preparation,” says Perreault.

“Documents such as a business plan, cash flow projections, financial statements, and a good credit rating report are outstanding items to have in your back pocket. They can help demonstrate to a lender that a loan is necessary for growing the business and that the overall plan is sound.”

As Canada’s leading agriculture lender with a strong greenhouse portfolio, FCC has identified five common shortcomings that potential borrowers can make:

  • Non-existent or incomplete business plan, which is the key element of all business loan requests.
  • An overly optimistic budget forecast.
  • Inadequate allowance for cost overruns for ,projects.
  • Analysis of the market that lacks solid data.
  • Limited consultation with others such as an accountant, lawyer or other business owners.

A solid business plan identifies opportunities and challenges.

It enables you to take action and monitor progress. As an applicant, you should surround yourselves with advisors and mentors who can challenge and validate your business plan prior to the loan application.

“As a business owner, you might not always like what your mentors have to say. However, they do take an objective look at your numbers, which might mean sharpening your pencil in the short term to pave the way for greater success over the long term,” says Perreault.

“I know that as a business owner, you’re always busy. But, you need to take time to reflect and think about the big picture,” adds Perreault.

“Planning is critical to your business success, which ultimately contributes to a healthier industry and a stronger Canadian economy.”

The Importance of understanding the 5-Cs with loan applications
Many lenders apply the “5-Cs” when evaluating a loan application:

Character: training, knowledge, experience, financial skills, credit history, integrity.

Capacity: past and projected financial performance, outside income, working capital, quality of the current assets.

Commitment: the level of capital the borrower is investing and has access to.

Collateral: security available and offered, valuation.

Conditions: legislation, market, economy, environment.

A sixth “C” is Communication. Like any solid relationship, making sure that the lines of communication are always open between you and your lender is key – when things are going well with your business, and more importantly, when they’re not going as good.

The earlier you get your lender involved, the better chance you have to come up with a shared plan of attack to make sure the good times return as soon as possible.

While it’s most often a good idea to keep your personal and business loans separate, your personal credit history is still very important when applying for a business loan. Almost all lenders will look to your personal credit report when making a decision on new business lending, so keep that in mind when first approaching a financial institution.

In addition, there are a few other pieces of information that are important for your lender to see:

  • Net worth statement.
  • Past income tax returns and/or accountant prepared financial statements.
  • Government issued photo identification.
  • Recent pay stub or written employer verification.

For more information about successfully partnering with your lender and other lending essentials, including samples of a business planning worksheet and net worth statement, visit the Tools and Resources section of the FCC website at, or give us a call at 1-888-332-3301.

Shaun Humphries is a senior communication consultant with Farm Credit Canada.

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