The 50 percent decline in commodity prices of the last 24 months is taking a toll on Mid-South farmers and their communities. Judging from the auction calendars in these pages, some have already made a hard decision while others are still weighing their options.
For those in the latter category, one of those options may be having a conversation with someone like James W. Berry, an attorney with the Berry Law Firm in Rayville, La., who specializes in agricultural bankruptcy.
Berry was asked to speak on “When the Clock is Ticking: Handling an Ag Bankruptcy” during the Mid-South Agricultural and Environmental Law Conference in Memphis, Tenn., last month. He stressed farmers must keep their options open by talking with their lenders even when the conversation may be difficult.
“You go to your lender, and you sit down with him and tell him you have a problem,” said Berry. “You tell him ‘I’m not trying to beat you out of a dime, and, if I had the money, I would write you a check right now and pay you everything I owe you. But I can’t. What can we do about it?’”
Berry says lenders tend to be flexible under these conditions. “But if a grower sticks his head in the sand, doesn’t return his calls or answer his mail, the next thing he gets is a lawsuit because there’s not much the lender can do at that point.
“When he’s in that debt-stressed position, his chances of making a loan at a conventional bank are pretty slim. There are banks, and we have banks in our region, including one in particular, that participate in the 90-10 lending program, which is a great program, one of the greatest programs we have.”
In the latter, the debtor takes his financial statements to a participating lender. The lender, in turn, prepares a loan and sends the paperwork to the county Farm Service Agency. If the FSA office approves, USDA guarantees repayment of 90 percent of the loan.
“FSA examines the loan documents, and they take a real hard look at cash flow because they have rules for cash flow requirements,” said Berry. “And if they determine I’m a farmer meets the rules, FSA sends the bank a letter, promising to guarantee 90 percent of the loan.”