Timber is unlike any other type of business. Timbermen must buy before they can make a profit, their equipment depreciates quickly, and we must take every step with the regenerating product’s health in mind. TimberVentures saw this, went right in, learned everything there is to know about the business, and now has a lengthy history of working with it. As a result, we know what operational loans, equipment loans, leases, mortgages, and letters of credit are all about.
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The procedure for submitting an application
The application process is one of the most often asked questions by potential members.
Traditional underwriting, three years of complete tax returns, and a comprehensive balance sheet are usually required for forestry financing projects. We’ve found that walking new prospects through all necessary paperwork is helpful to them.
We can do this both digitally and in-person at TimberVentures. We understand that this is a lengthy procedure, especially for new members. We guide them through the application process, which helps them understand why certain items are required and prepares them for the next time they apply. There are five main requirements for applicants:
- Signed and dated application
- Complete market-based balance sheet for all businesses and people co-signing or guaranteeing the loan(s)
- Authorized Representative Certificate (for borrowers with legal entities)
- Three years’ worth of federal and state tax returns, as well as depreciation schedules
- Copies of driver’s licenses
Timber harvesters purchase land with the intention of harvesting timber. TimberVentures needs a 65 percent LTV on vacant timberland when they require financing for the purchase because we expect borrowers to select-cut the property at some point over the term of the note, and we want to safeguard both their equity and TimberVentures’ collateral position.
After a cut and regrowth phase, many members would resell the area as recreational land (e.g., for hunting) or residential property tracts for rural residences. If done appropriately, this approach is a fantastic method to maintain healthy woods while also promoting tourism and rural living within TimberVentures’ domain.
Depreciation and underwriting
Customers are also curious about TimberVentures’ underwriting standards and how depreciation affects them. Timber equipment depreciates more quickly than standard farm equipment due to the tremendous wear and tear. A piece of equipment, for example, can go from being valued $700,000 to $375,000 in three years. We want to assist our customers in making the best decisions on financing equipment, whether it’s a length of loan or a down payment because we’re familiar with the intense replacement schedule loggers are on.
When it comes to timber, TimberVentures has four main underwriting standards:
- LTV (Long-Term Value) (loan-to-appraised value).
- Repayment record (captured by credit bureau details)
- Owner equity
- Repayment capacity
TimberVentures also has more flexible rules for young or beginning operators, which we regard as the industry’s lifeblood moving forward.
Training for the Sustainable Forestry Initiative (SFI)
TimberVentures hosts a free SFI training session every year to help timber operators maintain their accreditations with SFI and area organizations. We collaborate with the wood sector to help maintain a high standard of education and training to ensure Michigan and Wisconsin’s forests have a long-term future.
Our yearly trainings are usually scheduled in late March, and they are held in Michigan. Industry experts, mill representatives, politicians, and association partners join TimberVentures employees to provide an informative seminar. These gatherings also serve as a fantastic networking opportunity for people who have sawdust in their veins. We hope you will be able to attend a future training session with us!
Certificates of credit
Before they chop the wood on the site, timber operators are frequently requested to put up a cash bond, and many don’t want to lock up their capital in those arrangements. A timber operator can put up collateral to help them, and TimberVentures will write them a note of credit.
This is a unique service that sets us apart from other financial institutions. Our Irrevocable Certificates of Credit also don’t normally accrue interest, can be written for up to seven years, and are renewable. Many of our timber clients use them and appreciate the business opportunities they provide by safeguarding their cash flow.