The Purpose and Promise

The USDA Food Supply Chain Guaranteed Loan program was designed to fill a crucial gap in the food supply chain by focusing on projects in the “middle of the food supply chain.” Unlike other USDA guaranteed loan programs, which primarily cater to rural markets, this program had a unique feature – it could be used to finance rural and urban projects. The intent was clear: to foster diversity, security, and resilience in the U.S. food supply chain.

The program’s promise lay in its ability to provide financial support to businesses and organizations that played pivotal roles in the food supply chain but often struggled to secure funding through traditional means. These projects ranged from food processing facilities to distribution centers, and the goal was to create a more sustainable and robust system capable of withstanding unforeseen challenges, such as the disruptions caused by the COVID-19 pandemic.

The Fall of the Food Supply Chain Program

The USDA Food Supply Chain Guaranteed Loan program was canceled in May 2023. It was not due to any inherent flaws in the program itself, but rather as a result of broader political negotiations. President Joe Biden and U.S. House of Representatives Speaker Kevin McCarthy engaged in discussions aimed at increasing the U.S. debt limit. These negotiations culminated in the creation of the Fiscal Responsibility Act (FRA).

The FRA was a budgetary policy that sought to reduce the deficit by $1.5 trillion over the course of a decade while safeguarding critical benefits such as social security, Medicare, and Medicaid. Importantly, no cuts were made to the President’s landmark policy achievement, the Inflation Reduction Act. Instead, the FRA targeted unspent COVID-19 funds, including those allocated through the ARPA, which included the remaining guaranteed loan authority for the Food Supply Chain program.

Impact and Implications

As a result of the FRA, the USDA Food Supply Chain Guaranteed Loan program saw its future prospects dashed. Loans that had already been approved and funded under the program remained unaffected, the cancellation of unspent funds meant that no additional financial support would be available for future projects. 

One of the program’s standout features was its ability to finance urban projects, a departure from the typical rural focus of USDA guaranteed loan programs. This aspect was particularly appealing, as it recognized the importance of urban areas in the food supply chain and aimed to address their unique challenges.

The rise and fall of the USDA Food Supply Chain Guaranteed Loan program offers a glimpse into the complexities of government initiatives and the impact of political negotiations on well-intentioned programs. Despite its potential to create a more resilient, diverse, and secure U.S. food supply chain, the program became a casualty of budgetary compromises.

While the program’s cancellation may have left some disappointed, it serves as a reminder of the need for ongoing efforts to strengthen the nation’s food supply chain. As the agricultural landscape continues to evolve, it remains crucial for policymakers and stakeholders to explore innovative ways to address the vulnerabilities in the food supply chain and ensure its long-term sustainability. While the Food Supply Chain program may be a chapter of unfulfilled promise, the quest for a more robust and secure food supply system must continue through other avenues and initiatives.

The post The Rise and Fall of the USDA Food Supply Chain Guaranteed Loan Program appeared first on First National Bank of Oklahoma.

Understanding Credit Scores

If you want to boost your credit score to buy land or modernize your farming equipment, it’s vital to understand the basics of credit scores. According to Equifax, a credit score is a numerical rating that indicates an individual’s creditworthiness or a person’s qualification for financial assistance. They are commonly used by lenders, such as banks and credit card companies, to assess the risk of lending money to a person. Credit scores are calculated based on various factors related to a person’s credit history and financial behavior. According to Experian, a credit score ranges from 300 to 900. In general, here’s how each tier of score is viewed:

• Poor credit score: 300-579
• Fair or passing credit score: 580-669
• Good credit score: 670-739
• Very good credit score: 740-799
• Excellent or exceptional credit score: 800-850

Factors That Affect Your Credit Score

Here are some of the key elements you want to keep an eye out for that influence credit scores:

• Payment History: Your credit history is one of the most critical factors affecting your credit score. Lenders want to see a record of consistent, on-time payments. Late payments, defaults, or accounts sent to collections can significantly lower your credit score.
• Credit Utilization Ratio: This ratio compares the amount of credit you currently use to your total available credit. It’s calculated by dividing your credit card balances by your credit limits. Keeping your credit utilization ratio low (typically below 30%) is generally recommended for a good credit score.
• Credit History Length: The length of your credit history is another influential factor. A longer credit history allows lenders to assess your credit management behavior over time. It considers factors such as the age of your oldest account, the average age of all your accounts, and how recently you’ve used them.
• Credit Mix: A healthy mix of different types of credit — such as credit cards, loans, and mortgages — can positively impact your credit score. It demonstrates your ability to handle various credit obligations responsibly. However, it’s important only to take on credit that you can manage comfortably.
• New Credit Inquiries: When you apply for new credit, such as a loan or credit card, lenders typically pull your credit report to assess your creditworthiness. These inquiries are recorded on your credit report and can momentarily lower your credit score.

Significance of Good Credit Score for Agricultural Loans

Having good credit is crucial when applying for agricultural loans. Here are some reasons why good credit is significant in the context of agricultural loans:

• Lower Interest Rates: Lenders determine the interest rates for agricultural loans based on the borrower’s creditworthiness. A higher credit score often translates to lower interest rates. Good credit makes you more likely to qualify for favorable loan terms, including lower interest rates.
• Higher Loan Limits: A good credit score enables you to access higher loan limits. Lenders are often willing to lend larger amounts to borrowers with a proven track record of responsible credit management. This can benefit agricultural operations that require substantial funding for equipment purchases, land acquisition, or expansion.
• Flexible Financing Options: Good credit offers a broader range of financing options. It allows you to explore different loan products and lenders and find the best fit for your specific agricultural needs. With a strong credit profile, you may have access to specialized agricultural loans with favorable terms and conditions tailored to the industry.

Steps To Improve Your Credit Score

If you want to attain the credit score needed to buy land, here are some steps you can take:

• Review Your Credit Reports: Start by obtaining free copies of your credit reports from the three major credit bureaus (Equifax, Experian, and TransUnion). Review the descriptions carefully and check for errors. If you find any, dispute these errors with the credit bureaus to have them corrected.
• Pay Bills on Time: Payment history is a significant factor in credit scoring. Make it a priority to pay all your bills on time, including credit card, loan, and utility bills.
• Manage Credit Card Usage: High credit card balances concerning your credit limits hurt your overall credit score. Try your best to maintain a credit card use ratio of less than 30%.
• Manage Credit Accounts: Be cautious about opening new credit accounts unless necessary. Opening multiple accounts within a short period can raise concerns for lenders.
• Establish a Solid Payment History: If you have a limited credit history or a few negative marks, focus on establishing a solid payment history. Consistently making on-time payments over time demonstrates responsible credit management and can improve your credit score gradually.

Apply for an Agricultural Loan Today

Agricultural loans and credit scores are inseparable. Without establishing and maintaining a favorable credit score, you’re limiting yourself to potential borrowing opportunities. If you’re interested in financing your agricultural operation, contact our team and find the perfect loan solution for your unique needs.

The post Credit Scores and Agricultural Loans appeared first on First National Bank of Oklahoma.

Whether you are a small-scale farmer looking to expand your operations or a seasoned agricultural entrepreneur planning to invest in modern equipment, understanding how to qualify for an agricultural loan is essential. This blog post will explore what an agricultural loan entails and its potential uses. We’ll also provide a step-by-step guide on applying and qualifying for these types of loans. 

What Is an Agricultural Loan?

An agricultural loan, also known as a farm loan or ranch loan, is a specialized loan program designed to meet the unique needs of individuals and businesses involved in agriculture. Banks, credit unions, and government programs typically offer these loans. Agricultural loans come with specific terms and conditions tailored to the farming and ranching industry, making it easier for farmers, ranchers, and agribusinesses to obtain the necessary funds for their operations.

What Can Agricultural Loans Be Used For?

Agricultural loans can be utilized for various purposes related to farming, ranching, and agricultural businesses. Here are some common uses:

• Land Acquisition: Farmers and ranchers can use agricultural loans to purchase additional farmland or expand their existing holdings.
• Equipment and Machinery: Loans can be used to invest in modern farming equipment, machinery, and tools, enabling increased efficiency and productivity.
• Livestock and Poultry: Ranchers may require funds to buy livestock or poultry for their farms, which they can finance through agricultural loans.
• Crop Production: Loans can be utilized to cover the costs associated with crop cultivation, including seeds, fertilizers, irrigation systems, and labor.
• Farm Infrastructure: Agricultural loans can be used to build or upgrade farm structures, such as barns, storage facilities, and greenhouses.
• Working Capital: Farmers often require additional working capital to manage day-to-day expenses, including labor costs, utilities, and other operational needs.

How To Apply for an Agricultural Loan

Applying for an agricultural loan requires careful planning and preparation. If you want to know how to get agriculture loans, here are some of your options:

• Loan Programs From Major Banks: This is the most common avenue for farmers seeking financial assistance. Most major commercial banks in the U.S. offer some sort of agricultural loan assistance program. 
• Government Loan Programs: Some farmers who don’t qualify for traditional bank loans turn to government programs for help. The U.S. Department of Agriculture has various bodies dedicated to helping farmers with financial needs.
• Agricultural Home Loans: Other than dedicated farming loan programs, the U.S. Department of Agriculture also offers community facilities programs for farmers looking for housing. This is applicable if you want to build a residential unit beside your farm.

How To Qualify for an Agricultural Loan

While eligibility requirements may vary among lenders and loan programs, here are some general factors that can increase your chances of qualifying for an agricultural loan:

• Credit History: Maintain a good credit score by making timely payments and managing your debts responsibly. Lenders often consider credit history to assess your financial reliability.
• Collateral and Equity: Having collateral, such as land or machinery, can strengthen your loan application. Lenders often require borrowers to have a certain level of equity in their farming operations.
• Financial Stability: Lenders assess your financial stability by reviewing your income, expenses, and profitability. Demonstrating a consistent income and positive cash flow increases your chances of approval.
• Experience and Expertise: Highlight your expertise in the agricultural industry. Lenders are more likely to approve loans for individuals with a proven track record in farming or related fields.
• Repayment Capacity: Show your ability to repay the loan by providing accurate financial projections and demonstrating that the loan amount can be serviced within your farm’s expected cash flow. Maintaining several years of organized, complete, and accurate financial statements lends credence to your credit application. 

The Bottom Line

Securing an agricultural loan can provide the necessary financial support for farmers and agribusinesses to achieve their growth objectives. By understanding what agricultural loans entail, exploring their potential uses, and following the steps outlined above, you can enhance your chances of qualifying for an agricultural loan.

Remember, thorough preparation, a well-crafted business plan, and meeting the lender’s requirements are vital to securing the funds you need to drive your agricultural endeavors forward. Understanding the specifications for each loan program you want to try is also critical. Qualify for our agricultural loan program now!

The post How To Qualify for an Agricultural Loan: A Comprehensive Guide appeared first on First National Bank of Oklahoma.

This blog post will explore these two loan programs and help you grasp the nuances that set them apart. By understanding FHA loans, USDA loans, and their eligibility requirements, you will be better equipped to navigate the loan application process and make a choice that aligns with your needs. Read on and discover the factors that differentiate FHA vs. USDA home mortgage loans.

What Is an FHA Home Mortgage Loan? 

As defined by the Consumer Financial Protection Bureau, private lenders offer an FHA loan monitored and insured by the Federal Housing Administration (FHA). Unlike conventional loans, the FHA does not directly lend the money; instead, it provides insurance to lenders, reducing their risk. 

The U.S. Department of Housing and Urban Development states that the Federal Housing Administration offers FHA loans tailored for seniors and individuals seeking financing for mobile homes and factory-built housing. This ensures accessible homeownership opportunities for a wider range of individuals.

One of the key advantages of FHA loans is their flexibility in down payment requirements, allowing for as low as a 3.5% down payment. Additionally, FHA loans often accommodate borrowers with lower credit scores, making them a more accessible option than most conventional loans.

As highlighted by Investopedia, these loans are primarily designed to help moderate-to-lower-income families achieve their dreams of homeownership. This makes FHA loans particularly popular among first-time homebuyers. 

The creation of the FHA by the government aims to mitigate risk for lenders and simplify the qualification process for borrowers seeking home loans. Even if you have had challenges with your credit history or cannot provide a substantial down payment, an FHA loan may still be viable for you.

It’s important to note that the maximum loan amount for an FHA loan varies by county. Therefore, it’s crucial to understand the specific limits set for the area where you plan to purchase your home.

What Is a USDA Home Mortgage Loan?

Now that you understand what an FHA loan entails let’s explore its counterpart, the USDA loan.

Backed by the United States Department of Agriculture, this home mortgage program aims to assist individuals with low-to-moderate income levels in their quest for homeownership. As explained by Business Insider, USDA loans are specifically tailored for those who wish to purchase homes in rural or suburban counties. Much of First National Bank of Oklahoma’s core service area in central, northern, and northeast Oklahoma qualifies as rural or suburban. 

One remarkable aspect of USDA loans, as highlighted by US News, is the potential to finance up to 100% of the appraised value of the property without requiring a down payment. Just imagine the freedom and relief of securing a home loan without the immediate burden of a substantial upfront cost. The ability to secure 100% of appraised value financing is ultimately determined by the lender, and is not typically offered by First National Bank of Oklahoma. 

When exploring USDA home mortgage loans further, it’s essential to understand the two types of loans available, as per Investopedia. 

The first is the Guaranteed USDA Home Mortgage Loan, which involves the USDA guaranteeing 90% of the mortgage value to eligible individuals who secure their loan through a bank or another commercial lender. This guarantee reassures the lender, allowing them to provide favorable terms and conditions to borrowers. 

On the other hand, the Direct USDA Home Mortgage Loan is a loan that the USDA directly offers, specifically tailored for individuals with very low- and low-income levels. It is particularly suitable for those who face challenges in obtaining an affordable mortgage through conventional channels and require secure and sanitary housing options. These loans typically take more time to close than Guaranteed USDA Home Mortgage Loans and can involve significant paperwork requirements. 

You can confidently explore this financing option by understanding the ins and outs of USDA home mortgage loans. You can also potentially realize your dream of homeownership in a tranquil rural or suburban setting.

Differences Between FHA and USDA Home Mortgage Loans

Regarding home financing programs, weekand.com outlines that USDA and FHA home mortgage loans are designed to make housing more accessible for citizens and qualifying immigrant non-citizens. These programs share a similar goal but have notable differences that you should be aware of when looking for your home financing option.

USDA home mortgage loans are made to help low-income buyers purchase homes in rural areas. This is a popular product within First National Bank of Oklahoma’s Ponca City and Tonkawa trade areas. Conversely, FHA loans provide opportunities to buy homes in metropolitan or rural areas if borrowers do not exceed the maximum loan limits that the government sets for the specific location. First National Bank of Oklahoma does not originate as many FHA loans as it does USDA loans. 

Looking at the costs associated with these loans, FHA loans tend to be much more expensive than conventional loans for borrowers with good credit and a medium down payment of around 10% to 15%. However, FHA loans can often be the most affordable choice for borrowers with lower credit scores or those with a smaller downpayment. These loans offer a viable option for individuals who may find it challenging to meet the strict requirements of conventional loans.

USDA loans generally have reduced costs compared to FHA loans, according to the Consumer Financial Protection Bureau. Borrowers will pay an upfront fee and must pay ongoing mortgage insurance premiums to the USDA in exchange for the guarantee, but these are typically lower than the cost of the FHA home mortgage product.

Eligibility Requirements: USDA vs. FHA Home Mortgage Loans 

By now, you might be curious about the requirements for both types of loans. Meeting these criteria will pave the way for a smooth and successful loan application, bringing you closer to your homeownership goals.

According to the United States Department of Agriculture, USDA home mortgage loans come with specific guidelines that determine eligibility. One key requirement is that your household income must align with the established guidelines for low and moderate incomes. These limits vary depending on your location and the specific loan program. 

The property you intend to purchase must be in an eligible rural area, as defined by the USDA. This means that the population of the area should not exceed 35,000 residents. It’s important to note that the home you purchase with a USDA loan must be your primary residence. Curious if your location qualifies? Reach out to our USDA specialist at First National Bank of Oklahoma and we’ll run a quick search for you. 

While a credit score of at least 640 is generally ideal, qualification is still possible even if your score is lower. Having a clean record with no delinquency on any federal debt is crucial. Moreover, eligibility for USDA loans is limited to U.S. citizens or legal nonresidents.

Turning our attention to FHA home mortgage loans, CNBC emphasizes some essential requirements that you must meet to be eligible for this program. First and foremost, the property you intend to purchase with an FHA loan must be your primary residence, emphasizing the importance of this loan in facilitating homeownership for individuals like you. 

FHA loans provide the flexibility to acquire residential properties of up to four units as long as you plan to reside in one of the units. In addition, an FHA-approved home appraiser must conduct a special FHA appraisal to ensure the property meets the required standards. 

Regarding credit scores, FHA home mortgage loans offer options tailored to different financial situations. A credit score of 580 or higher is generally accepted, with a minimum down payment of 3.5%. If your credit score falls between 500 and 579, you may still qualify by providing a higher down payment of at least 10%. 

Unlike USDA loans, FHA loans do not impose income limits, allowing greater flexibility for borrowers. The maximum loan size varies depending on the property’s location, ranging from $472,030 to $1,089,300 for a single-family home. Lastly, the maximum debt-to-income ratio typically stands at 43%, although certain circumstances may permit higher.

Bring Your Homeownership Goals to Life

Exploring the differences between USDA vs. FHA home mortgage loans has shed light on each program’s unique features and eligibility requirements. Whether you’re drawn to the charm of rural living or the vibrant energy of metropolitan areas, these loan options provide avenues to fulfill your homeownership dreams. 

The USDA loan program opens doors for low-income borrowers in rural neighborhoods, offering the opportunity to purchase a home with zero down payment and generally lower costs than FHA loans. 

On the other hand, FHA loans provide a more flexible path to homeownership, with options for buyers in both metropolitan and rural areas, accommodating diverse credit scores and down payment capabilities.

If you need assistance navigating the complexities of home financing, do not hesitate to contact us today. We can guide you through the loan application process, explain the intricacies of eligibility requirements, and ensure you understand the financial implications.

The post What’s the Difference Between USDA and FHA Home Mortgage Loans? appeared first on First National Bank of Oklahoma.

Additionally, construction is a major consumer of manufacturing, mining, and various other services, making it one of the largest customers in these sectors. Construction business loans are designed for businesses in the construction industry and can provide funding for equipment purchases, payroll, and other business expenses. 

To obtain a construction business loan, assess your business’s financial health, determine your loan needs, gather necessary documentation, apply for the loan, and wait for approval. The process can be lengthy and challenging, but it can be done successfully with the right preparation and research. Read on to learn more about commercial construction loans.

What Are Commercial Construction Loans?

If you are a business owner or investor planning to construct or renovate a commercial property, you may need to consider taking out a commercial construction loan. This type of loan provides financing specifically tailored for commercial construction projects and can be a valuable tool for helping you bring your project to life.

The funds from a commercial construction loan can cover a variety of expenses related to your project, including the cost of materials, labor, and permits. These loans typically have various terms, interest rates, and repayment schedules, depending on the lender and the borrower’s circumstances.

Business Insider reports that a construction loan’s interest rate is usually higher than a regular mortgage. Lenders perceive construction loans as high-risk since there is no established property to serve as collateral, which is why they demand higher interest rates.

How Do Commercial Construction Loans Work?

According to Investopedia, commercial loans are typically provided to different types of businesses to assist with funding needs, whether for short-term operational expenses or the purchase of equipment necessary for production. These loans may also be used to cover more basic operational needs, such as payroll or purchasing supplies.

Collateral, which may include property or equipment, is often required and can be seized by the lender if the borrower defaults on the loan or goes bankrupt. In some cases, future accounts receivable may be used as collateral. 

Types of Construction Loans

Understanding the different types of commercial loans can help businesses make informed financial decisions and secure funding for their ventures. As per The Balance, there are several types of commercial loans. These include the following:

• Land Development Loan: Used to prepare raw or undeveloped land for commercial or residential use, including installing infrastructure.
• Interim Construction Loan: A short-term loan covering labor and material costs for commercial development projects, usually valid for 18 to 36 months.
• Mini Perm Loan: A short-term loan like a bridge loan that pays off outstanding loans for projects that will produce income, replaced by long-term financing after 2-3 years.
• A&D Loan: For purchasing raw land or underutilized/run-down property that needs improvements, covering the purchase and necessary improvements.
• Takeout Loan: Provides permanent financing for commercial projects with temporary loans, sometimes required before a short-term loan can be granted.

Why Get a Commercial Construction Loan
A commercial construction loan can offer the necessary funds to upgrade and improve an existing commercial property that needs renovations. Renovating your property can increase its value, attract new tenants or customers, and promote business growth.

If your business is expanding and you require additional space to cater to the growth, a commercial construction loan can provide the necessary funds to expand your existing commercial property or construct a new one. This can help you fulfill the needs of your clients or customers and boost your revenue.

For investors, a business construction loan can be an opportunity to invest in commercial construction loan properties and earn income through rental or resale. These loans can provide a way to enter the thriving commercial construction loan market and potentially achieve a high return on investment.

How To Get a Commercial Construction Loan

Getting a commercial construction loan is different from a home loan because it involves buying a property for business purposes and paying the loan with business revenue. Lenders have three main requirements to ensure that your business can cover the loan payments:

• Security: Investopedia notes that the majority of lending institutions mandate a minimum down payment of 20% for construction loans, while certain lenders may insist on a higher percentage, reaching up to 30-40%+. Property insurance is also essential, and the lender will check the property’s title for outstanding liens or claims.
• Income: Forbes states that a lower debt-to-income (DTI) ratio indicates a greater amount of available cash that can be allocated toward monthly loan payments. Lenders generally require a maximum ratio of 40-45% when approving construction loans, although this could be lower depending on the details of the individual project. 
• Credit: Lenders check your credit history and require a personal guarantee. CNBC explains that the minimum credit score required is typically between 660 and 720. Lenders assess your business’s revenue source and how long you’ve been in business. 

To make an informed decision, Market Business News recommends that you thoroughly research a selection of potential lenders. Further, you should actively negotiate the loan terms, which include crucial aspects such as the interest rate, loan amount, and repayment terms. 

Doing so can maximize your potential for obtaining a loan that aligns with your financial goals and protects your long-term financial well-being. Remember, careful consideration and effective negotiation can significantly impact your loan’s affordability and overall cost.

Grow Your Business With a Commercial Construction Loan

The importance of commercial construction loans lies in providing businesses with the financial resources to expand and grow their operations. With a commercial construction loan, businesses can acquire the funds they need to construct or renovate a commercial property, which can lead to increased revenue, improved business operations, and long-term growth.

If you’re a business owner looking to expand your operations, consider securing a commercial construction loan to acquire the funds needed for your project. Contact us today to learn more about business construction loan requirements and the application process.

The post Construction Business Loans: What Are They and How To Get One appeared first on First National Bank of Oklahoma.

This blog post is geared specifically to help parents educate their children about good credit-building and maintenance strategies. By making the financial system less daunting for your children, you can help them tackle future financial hurdles easily and confidently.

When Can You Start Building Credit?

The general answer to the question “What age can you start building credit?” is 18, but there’s more to it than that. According to CNBC, any young adult over 18 can begin establishing and growing their credit score. However, various states might impose varying limits on opening a credit account for a minor. 

Some states may have different age restrictions, so verify with your state. CNBC also states that several financial organizations may even permit credit card usage to minors under 18, provided they have the authorization to use them. It is vital — regardless of age — to impose a solid foundation for your children’s credit future as soon as possible.

How To Help Your Child Build Credit

If you want to help your child be better at credit and financial management, here are some strategies you can try depending on their age.

Before Turning 18

As previously stated, most states don’t allow minors under 18 to open a credit card account. At this stage, you’ll profit from learning and motivating tactics, as demonstrated by CNBC. However, you can also offer them hands-on experience by making them an authorized user on one of your credit cards. Here are some strategies for this: 

• Teach them the credit system: Educate them on the fundamentals of credit, starting with what a credit score is and how to read their credit report. You may help your child make wise financial decisions by helping them understand the process and principles underlying the credit system.
• Authorize them to use a credit card: With account authorization, several credit card companies enable parents to permit their children to use their credit cards. This way, your child will have first-hand experience using and managing credit cards.
• Teach them budgeting strategies: If you’re not yet confident about authorizing your children to use your account, you can teach them a few budgeting strategies. Allow them to handle their allowance or use a budgeting tool to assist them with controlling their finances.
• Emphasize the importance of paying bills on time: Although your children are not yet in charge of utilities, you may stress the significance of paying bills on time. Explain to them how late payments can hurt their credit score and how they should keep organized and pay their obligations on time.
• Incentivize saving: Rewarding your child for saving can teach them to respect money and the significance of financial discipline. For example, you could make it more engaging by having them compete to see who can save the most money in a month or by having them complete tasks to earn additional allowance.

After Turning 18

When your children reach 18, it becomes easier to assist them in building their credit scores since they may now create a credit card account in their own name, according to Lexington Law. 

Here are several approaches you can take:

• Create a student credit card for them: Student credit cards offer lower credit limits and may not often require a cosigner, making them an excellent starting point for young adults. Shop around for the finest deals and choose one with affordable interest to maximize their advantages.
• Create a secured credit card: A secured credit card is an excellent option if your children want something other than a student credit card. Secured cards require depositing money as collateral, serving as the credit limit. This way, they can still build their credit score without putting themselves at risk.
• Teach them about loans: Loans are a significant part of adulthood and are often needed to make substantial purchases like a car or a home. Explain to them the fundamentals of taking out loans, and let them know that they should always aim to pay off their loan appropriately.
• Co-sign a loan with them: If you co-sign a loan, you are legally accountable for the debt your children cannot pay. Consider co-signing a used-car loan to teach them how to manage their finances properly and avoid financial problems.
• Help them set big financial goals: Set long-term financial objectives with your children and explain the necessity of creating and adhering to a budget. Encourage children to save for the future, whether for a vehicle or retirement, so they may learn to prioritize their costs and make sound financial decisions.

Understanding How Credit Works

As a parent, you already know how the credit system works, but explaining it to your child could be tricky. Here’s an example of how you can simplify credit and help your children understand the basics, based on an explanation from the University of Oklahoma.

Taking “credit” involves borrowing money from a financial organization, such as a bank or credit card company, and you must repay it with interest. By using credit, you are boosting your credit score, allowing you to take out larger loans in the future to make larger expenditures.

Monitoring Credit Reports

Before your child turns 18, it’s essential to check their credit for any history of use. Some fraudsters can mask themselves under the guise of your child’s name to open accounts or take out enormous loans, as reported in PR Newswire. You should monitor your child’s credit and ensure all the information is accurate and up-to-date. Once they turn 18, they must check their credit reports at least once a year to ensure no discrepancies.

Set Off Your Child Towards Financial Freedom

Financial literacy is the key to financial freedom. Without understanding the modern monetary system, your child is at great risk of sinking into debts and other catastrophic financial liabilities. Help them set off to a great start with the help of First National Bank of Oklahoma. Contact us today to learn more about our financial solutions and how you can help your children start building a solid credit background.

The post At What Age Can You Start Building Credit? appeared first on First National Bank of Oklahoma.

This blog post will explore the ins and outs of manufacturing loans and how they can be used to grow your business. We will delve into the different types of business loans available for manufacturers and the various financing options in the market. 

Keep reading to understand better how a manufacturing business loan can be a valuable tool for taking your business to the next level.

What Is a Manufacturing Loan?

According to the Federal Financial Institutions Examination Council, business or commercial loans are a common type of loan provided to business enterprises involved in commercial or industrial activities, including sole proprietorships, partnerships, or corporations. 

Manufacturing business loans, also known as commercial loans or C&I loans, play a significant role in providing businesses with the financial resources needed to grow and succeed. As highlighted by the Federal Reserve Bank of San Francisco, these types of loans are crucial for the banking industry and represent a fundamental source of funding for the business sector. 

Whether you want to purchase new equipment, expand your operations, or hire additional staff, a manufacturing loan can help make your goals a reality. As a manufacturer, a commercial loan can be a useful tool to help finance your business ventures and maintain a steady cash flow. 

It’s important to understand the different types of manufacturing business loans available and the associated repayment terms and interest rates to decide when selecting a loan that best fits your business needs.

Types of Business Loans for Manufacturing 

Manufacturing businesses can access various loan options to obtain the necessary capital to start, expand, or grow their operations. One such option is an SBA loan, a lending program administered by the U.S. Small Business Administration. According to the SBA, their lending and investment offerings have given manufacturers over $5 billion in capital. SBA loans may offer more favorable terms than traditional commercial loans, making them a popular choice among manufacturers.

Rural manufacturers may also benefit from a USDA guaranteed loan. These loans are available to manufacturers located in rural areas, and like SBA loans can offer more favorable terms than other financing options. USDA guaranteed loans must be collateral secured and can be larger than SBA loans, with loan limits up to $25 million. To see if your business qualifies as rural, check out First National Bank of Oklahoma’s mapping tool here. 

Equipment financing bank loans are another popular option available to manufacturers. As stated by the U.S. Chamber of Commerce, this loan is often used to upgrade or replace outdated machinery, increase production capacity, or improve production efficiency. 

As per Business News Daily, invoice financing or “factoring” is a loan option that allows manufacturers to sell their unpaid invoices to a lender in exchange for immediate cash. This type of loan is particularly useful for manufacturers that operate on a tight budget or have cash flow constraints. First National Bank of Oklahoma does not typically offer this sort of financing. 

How Can I Use a Manufacturing Business Loan?

If you’re wondering how to use a manufacturing business loan, the Small Business Administration (SBA) provides a comprehensive list of options to help you determine how to allocate your funds. One popular use of a manufacturing business loan is to purchase and upgrade equipment. With new equipment, you can improve production efficiency, reduce costs, and increase output capacity, ultimately leading to higher revenue.

Another way to use a manufacturing business loan is to expand or renovate facilities. If you need additional space, a business loan can help you cover the cost of construction or leasing, providing you with a larger production area. 

Moreover, a manufacturing loan can also be employed to procure inventory, execute improvement strategies, devise management plans for your workforce, explore international markets, and research innovative manufacturing processes. 

What Financing Options Are Available for Manufactures? 

When it comes to financing options for manufacturers, there are various alternatives available aside from the types that have been previously mentioned. Investopedia notes that certain financial institutions or banks provide renewable loans that can be extended without limit, providing a flexible and ongoing source of funding for manufacturers.

Further, Manufacturing.net emphasizes that manufacturers may consider term loans as an alternative financing option with interest rates that fluctuate based on credit, term, and funding timeframe. Although the requirement for collateral may vary based on the lender and their creditworthiness, personal guarantees are usually necessary.

Grow Your Manufacturing Business With Financing

A manufacturing business loan can give you the necessary capital to grow and expand your business. There are various ways to utilize these funds, from purchasing equipment to exporting to international markets. It’s important to research different financing options to find the best fit for your needs. 

Contact First National Bank of Oklahoma today to explore financing options that can help your manufacturing business grow and thrive.

The post Manufacturing Business Loans: How Can They Be Used? appeared first on First National Bank of Oklahoma.

According to Grand View Research, the size of the world market for agricultural equipment was estimated at $155.68 billion in 2021, and it is projected to increase at a compound annual growth rate (CAGR) of five percent from 2022 to 2030. It is assumed that the market will develop as a result of favorable climatic conditions for food production and government assistance in the form of loan waiver programs for farmers in all income brackets.

This article will give you key information on the best equipment financing considerations to help you make an informed decision.

Assessing Your Balance Sheet

Your balance sheet is the financial statement that lists the assets and liabilities of your business as of a particular date. Assessing your balance sheet can help you determine the best possible way to acquire your needed equipment. It will help you determine whether you have cash on hand to buy the equipment or whether you need to lease or apply for a loan.

Assessing your balance sheet will help you consider what will happen with your business if any financial surprises arise. It also outlines how you plan to acquire your equipment in the future. For example, if you choose to pay cash for the equipment, will you still have enough cash on hand to bring the business out of an unexpected slump? Will you have any remaining cash after purchasing the equipment to act as a lifeline for your company when all other financing alternatives have dried up?

Do You Buy or Lease?

The choice of whether to buy or lease the equipment is an important consideration you need to make. According to Hartford, leasing equipment can lower upfront costs when compared to outright purchases. It also lowers the likelihood that you will be stuck with outdated equipment if your contract calls for upgrades, and even offers an income tax break because you can write off your leasing costs as a business expense. However, it is also important to consider that the monthly expenses will not stop as long as you are leasing the equipment.

On the other hand, although buying the equipment is costly, you will have direct control and ownership over it for your business. Consider either buying or leasing the equipment based on your needs and what will help you achieve your business goals.

How Does It Affect Your Bottom Line?

One of the key reasons why you are getting equipment for your business is to increase your bottom line. You should consider how your equipment financing decision will affect your overall profitability. You can choose the best equipment financing decision that will help you reach your goal depending on whether you want to use the equipment for the long or short-term. 

For example, leasing would be a great decision if you only need the equipment for a specific project. However, consider whether leasing or purchasing will have a positive impact on your bottom line if you are going to need the equipment for the long term. Simply put, decide on a financing solution that will enable you to meet your goals.

Availability and Usage

It is important to consider what type of equipment you need for your business, its usage, and its availability. Then, you can weigh the advantages and disadvantages of both buying and renting the equipment. For example, you might have thought that leasing would save you money, but the equipment’s availability and usage are limited to meet your business needs. 

It’s important to note that leasing might occasionally come with business risks, such as the equipment not being available when you need it. In contrast to purchasing, you will have complete control over the equipment’s availability and use.

Taxes

According to the research conducted by Organisation for Economic Co-operation and Development, the tax laws affecting agriculture may take different forms in every country, however, they can generally be categorized using the following typology:

• Taxes on income
• Profits and capital gains
• Social security contributions
• Taxes on payroll and workforce
• Taxes on property
• Taxes on goods and services

Even though they are necessary, taxes for the agricultural sector can have a significant impact on the revenue and total profit of the farm or ranch. Therefore, it’s crucial to think about how your equipment investment will influence your taxes. As mentioned, financing and leasing of equipment provide tax advantages, allowing the financing costs of lease payments or loan payments to be classified as operational costs.

The Bottom Line

It is vital to invest in equipment because it is crucial to the success of the agriculture business. Given that capital equipment is not easy, consider the best equipment financing decision that will benefit your business, improve your bottom line, enhance your tax status, and most importantly, help you meet your needs and reach your business goals. Based on your business goals, you will know what type of equipment you need and how its availability and functionality will help your business.

If you need assistance making the best equipment financing decision, FNB has you covered. Our team of experts offers the best financing options for your equipment needs that will satisfy your requirements and help you reach your business goals. Contact us today and learn more about how our equipment financing services can help your business achieve greater success.

The post Considerations for Making the Best Equipment Financing Decision appeared first on First National Bank of Oklahoma.

So, how do you go about financing such a purchase? This is where understanding different options for equipment financing can come in handy. Equipment financing offers businesses access to the capital they need while helping them keep cash on hand for other investments or improvements.

What Is Equipment Financing?

Equipment financing is the process of using a loan to purchase equipment for business purposes. It can be used by businesses of all sizes and types, from small startups to large corporations. This type of financing allows businesses to acquire essential tools and machinery without having to use up cash reserves or wait until adequate funds have been saved.

It offers an attractive option for businesses that need access to new technology quickly or are unable to save enough money at once for their desired equipment purchases. Another benefit is that the equipment itself may serve as collateral for the loan, which can reduce or eliminate a business’s need to pledge personal assets. As such, it can be a great way for businesses to acquire the equipment they need in a timely and cost-efficient manner while avoiding the risk of tying up personal assets. Additionally, equipment financing can be more attractive to businesses since the monthly payments are generally lower than what would be required for a loan with no equipment as collateral.

Equipment financing can also provide businesses with more flexibility since the loan terms, repayment schedule, and interest rate can be tailored to their individual needs. If you’re thinking about equipment financing for your business, it’s important to understand the different options available so you can make an informed decision.

Financing vs Leasing

When it comes to financing large-scale equipment purchases, there are two main options: financing and leasing. Both have their advantages and disadvantages and which option is best for you will depend on a variety of factors such as the cost of the equipment, how quickly you need the equipment, your credit score, and so on. For financing, you will generally pay the full cost of the equipment in installments over a set period of time. It is also important to note that with financing, you will become the owner of the equipment.

With leasing, on the other hand, you will generally pay a lower monthly rate and have use of the equipment for a set period of time before returning it or renewing your lease. Remember, though, that when leasing, you don’t become an owner of the equipment and may not receive any additional value from its sale at a later date. If you plan on staying in business for the long-term, financing may be a better option as it can provide you with more value over time.

Ultimately, when deciding which equipment financing option is best for you, it’s important to consider all of your options and weigh the pros and cons. Financing will generally cost more upfront but comes with the benefit of ownership; leasing will cost less upfront but does not offer any equity benefits. Consider your budget, timeline, and goals before making a decision. The right equipment financing option can help you get the most out of your business and make sure it’s equipped with the tools needed to succeed.

What Are the Options for Equipment Financing?

There are five major ways to finance equipment for your business: equipment loans, term loans, SBA loans, small business lines of credit, and a business credit card. For equipment loans, you can borrow a specific amount of money to purchase equipment. These loans typically have a fixed interest rate and repayment terms of several months to several years.

Term loans are similar to equipment loans, but they can be used for larger amounts and longer repayment periods. They can be useful for expansion projects and other large-scale investments. SBA loans are another option for equipment financing, but they usually require a substantial amount of paperwork and have fairly strict eligibility requirements. They are funded and/or guaranteed by the Small Business Administration and can be used to purchase new or used equipment. Small business lines of credit are a form of revolving loan that allows you to borrow up to a specific amount, pay it back, and then borrow again as needed. These are useful when you need short-term financing or want to free up cash flow.

Finally, a business credit card can also be used to purchase equipment and other goods and services. However, the interest rates are often quite high, so these should only be used for short-term financing needs or as an emergency solution if you find yourself in need of quick cash. As with all types of financing, it’s important to understand the terms and fees associated with each option before making your decision. 

Factors To Consider for Equipment Financing

One of the top factors to consider for equipment financing is whether or not you can afford the payments. Calculate your monthly budget to determine how much you can comfortably put toward a new piece of equipment. The next factor is the length of the financing term. You need to choose one that gives you enough time to pay off the equipment without breaking your budget or putting too much strain on your finances. Consider all aspects such as interest rates and loan terms to determine the best fit for your needs. Additionally, figure out the tax implications of financing the equipment. Depending on the type of equipment, you may be able to deduct some or all of the interest on your taxes.

Another important factor is the type of lender you choose. Different lenders have different rates, terms, and conditions so it’s important to compare them before deciding which one is best for you. You should also make sure that they are a reputable lender with a track record of success. Finally, consider what kind of options you have for upgrading or replacing the equipment in the future. If you plan on purchasing new machinery or software after a certain amount of time, make sure that your lender offers financing options to accommodate this need.

The Value of Equipment Financing Options

Equipment financing options can be an invaluable tool for businesses of all sizes, from startups to established companies. By taking advantage of the various types of equipment financing and customizing them to suit their own needs, businesses can acquire the tools they need at a fraction of what it would cost to buy them outright, while still being able to maintain control over their finances.

With careful planning and research into different business equipment financing options available in the market today, business owners can make informed decisions that will help them save money and continue to grow their businesses. When used properly, equipment financing options can also help businesses reduce their interest payments over time and make more efficient use of their capital. With this, companies can even increase their profits and build a more successful enterprise. As with any other investment, it’s important to understand the available business equipment financing options and find the best solutions for your business so that you can maximize your resources without sacrificing quality or value.

The post Understanding Equipment Financing Options appeared first on First National Bank of Oklahoma.

Whether this is your first time applying for a loan for an agriculture business or the tenth, knowing the top lending options will help you achieve your goals and increase profit. As a farmer, what are the lending options available for you?

Purchase of Land

Agricultural lands cost a hefty sum of money, and buying a parcel involves other fees. Thankfully, you can take advantage of the different financing options to purchase land.

Farm ownership loans are a lending option available to farmers who want to buy agricultural land. You may use this type of loan to buy land in a new location or to purchase land to extend an existing property. While its primary use is to acquire land ownership, there are many occasions when farmers can use it for other needs such as:

• As a down payment for agricultural land
• As payment for closing costs
• For improving soil and water quality and conservation
• Restructure debt
• For the purchase and construction of farm dwellings and other facilities

USDA FSA Guaranteed Loans

The Farm Service Agency can provide financing to eligible borrowers through two methods: direct loans and guaranteed loans.

Direct farm ownership loans are designed for farmers and ranchers who want to acquire rural land. Financing comes directly from the USDA, and the department acts as the lender. However, you may need to check availability first as this loan is only available in certain areas.

USDA FSA also offers guaranteed loans to farmers and ranchers.   Although  guaranteed by the USDA, private lenders provide the financing. This form of support can allow for terms or conditions which are more favorable for borrowers.

Equipment Financing

Having the right equipment for all your farm will increase your farm’s productivity. Farming equipment can be extremely expensive. Without financing, it will be hard to make equipment purchases. Equipment loans are available for financing most all equipment needs, and terms can be customized to fit each individual farmers cash flow. Like land ownership loans, some equipment loans can be financed leveraging various USDA programs, with both direct funding and guaranteed funding options available. 

Microloans

Microloan programs are designed to finance the needs of new farmers and non-traditional and niche types of farm operations. It may also be an option for agricultural businesses involved in marketing and sales arrangements like farmers markets. Microloans are ideal for financing equipment purchases with the loan amount reaching up to $50,000.

Specialized Loans

Specialized loans are another loan program guaranteed by the USDA Farm Service Agency. Emergency loans are an example of a specialized loan. While this is primarily used for emergency farming situations such as drought recovery, it may also be used to finance equipment purchases that will be useful to counter drought effects. 

Native American tribal loans are a type of lending option specially offered to the tribes to acquire equipment. However, this is not the only purpose of this loan. It may also be used to improve farming operations, acquire land within the tribal community, and increase production. 

All borrowers must meet certain requirements to be eligible for equipment financing. Some requirements that may be necessary include having managerial experience, the ability to settle debt, and good credit history. First National Bank of Oklahoma does not participate in all of these loan programs. 

Livestock Financing

With the increasing number of loan applications received each year, the FSA prioritizes underserved borrowers such as beginning farmers, veterans, and natives of rural locations. This also doesn’t mean they aren’t approving other borrowers. 

There is no specific loan designed for this particular purpose. However, since livestock is essential for maintaining farm operations and production activities, guaranteed loans, direct loans, microloan programs, and specialized programs are similar options for financing this type of agricultural need.

Asset Financing

Now, what are considered assets of farmers and ranchers? Farmers own two types of assets. Current assets are cash, livestock, supplies, feeds, and inventory stock. Non-current assets are farming equipment, dwellings and buildings, and breeding livestock.

Asset financing is a type of lending option for farmers where one can use his assets as security in exchange for a loan. 

To be qualified for asset financing, the borrower must present a balance sheet in addition to the standard loan requirements. A balance sheet is a statement that discloses your assets. Short- and long-term liabilities, shared equity, and other important information that summarizes your business’s current standing must be included in a balance sheet. 

Asset finance is a type of small business loan for agriculture that is often used to cover short-term needs for operational costs. However, there are also lending companies that offer longer asset financing terms. 

Restructure and Recovery

Not all loans turn out successful in the end. Some borrowers undergo duress causing financial struggles. When the borrower can no longer pay his debts, he can apply for debt restructuring.

Debt restructuring is a financing solution with the goal of restructuring your debts to make them easier to pay. Solutions may include lowering the interest rates and extending due dates for payments. 

With debt restructuring, farmers default to improve their chances of finishing the loan and staying in the business. Defaulting is a much cheaper option than declaring bankruptcy, although both ways can affect your credit standing.

Leasing and Hire Purchases

Leasing and hire purchases are another way to acquire assets with low risks. They are often used to finance equipment purchases but follow different terms than traditional loans offering liquid assets. It’s also important to note the difference between the two.

Leasing refers to paying rent for a determined period to be able to use a piece of equipment. The lender buys the equipment, rents it out, and may also charge interest rates for maintenance.

On the other hand, a hire purchase is a way to acquire an asset bought by a lender through monthly payments. At the end of the contract, you may need to settle a minimal fee for the transfer of title.

In Summary

Different loans for agriculture businesses are available for farmers to help them throughout their farming journey. Farm ownership loans, equipment loans, livestock financing, asset financing, and leasing and hire purchases are uniquely designed to fit the different needs of farmers. For farmers that go through financial struggles, debt restructuring helps provide lighter payment terms, so they can get their business back on track.

Do you need loan assistance? We are here to help. Our company offers different loan solutions that help farmers and ranchers achieve their business goals. Whether you need financing or loan restructuring, our team can help you. Talk to us to learn more about our products and services.

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