Vineyard & Winery Management

January - February 2012

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MANAGEMENT Pa. He noted that when position- ing for a business loan, it's best to take time before you meet with the lender to be able to provide the most in-depth information as pos- sible. "The first step is to get your books in order," he advised. "Before you meet with a lender, meet with a CPA. Poor bookkeep- ing will hurt your chances. Records must show that your business can cover the debt service. Lenders want to see responsibility and an ability to handle difficult market conditions and various risks, such as weather. They want to see that you're prepared." Another warning from Kohlhepp: Be ready for fees and work with a quality lender. "Be sure you under- stand the terms interest rate, loan- origination fees, etc." to disclose information regarding its inventory, markets and average production history. A vineyard will need to supply data on the age of its vines, costs of farming and pro- duction levels versus how much debt the property can handle, and projections." Other items such as taxes, insurance and a succession plan may come into play as lend- ers scrutinize the entire business to determine a potential loan's value. "As a cooperative, agri-specific lender," Rodda added, "our crite- rion doesn't change although credit status and times do." In business since 1916, American AgCredit specializes in providing financial services to agricultural and rural customers through a variety of loans. Rodda also looks for "second- ary support" when reviewing a loan application. "Equity, agricul- tural diversity and in some cases a variety of grapes can spread the risk," he said. "We also look at the applicant's personal balance sheet for such items as three-year tax records, production history and budget." When you talk with lenders, explain your business and its cash needs. Do not expect the lending representative to know the ins and outs of your business. Explain your experience, relevant education, marketing plan, distribution meth- od and how and when you expect a profit. Lenders want you to suc- ceed – it's how they make their money. They do not want to seize your land, equipment or other prop- erty. DIVERSIFIED REVENUE "Lenders are looking more at cash flow with a property rather than property value," noted John DiConza, vice president/commer- cial lending officer at American Borrowers should be prepared to go under lenders' microscopes. Photo: Thinkstock, Stockbyte "While there's overlap, there are different criteria for evaluating a vineyard versus a winery," said William Rodda, vice president at American AgCredit in Santa Rosa, Calif. "A winery will be required WWW.VWM-ONLINE.COM JAN - FEB 2012 VINEYARD & WINERY MANAGEMENT 117

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