The combine is parked, the grain is in the bin or on its way to town, and sometime between now and spring your lender is likely to ask for a year-end balance sheet.
For a lot of farms, that conversation feels different this year. USDA expects 2026 farm production expenses to rise about 4.5%, with fertilizer up about 15% and fuel up about 29%. Midwest farm operating loan rates averaged about 7.1% in the second quarter, and in the Chicago Fed’s second-quarter survey, no lender reported better repayment on non-real-estate farm loans than a year earlier, while 27% reported worse.
None of that means a tough meeting. It does mean the numbers matter, and it helps to know yours before you sit down. Here are five numbers lenders commonly look at, what each one means in plain English, and how a sample farm stacks up.
Start with a year-end balance sheet
Most of these numbers come from your balance sheet, which is a snapshot of what you own and what you owe on one date, often December 31. If you haven’t built one before, What a Farm Balance Sheet Actually Tells You walks through it line by line.
Two things lenders typically look for: land at market value, not what you paid for it, and every debt listed, including the operating line, equipment notes, real estate loans, FSA loans, and family loans.
1. Working capital and current ratio
What it is: Current assets (cash, grain in the bin, feeder cattle, prepaid inputs) compared with current liabilities (the operating line, bills owed, accrued interest and taxes, and the principal on term loans due in the next 12 months).
Working capital = current assets minus current liabilities
Current ratio = current assets divided by current liabilities
What it tells a lender: Whether the farm can cover the next 12 months of obligations without selling land or equipment.
Common scorecard ranges: A current ratio of 2.0 or higher is considered strong. Under 1.3 is considered vulnerable.
On a market-value balance sheet, grain in the bin counts at current market price, so a big price move changes this number even if nothing else on the farm does.
2. Debt-to-asset
What it is: Total liabilities divided by total assets.
What it tells a lender: How much of the farm is owned outright versus financed. It’s a solvency measure: could the farm cover its debts if everything were sold?
Common scorecard ranges: Under 30% is considered strong. Over 60% is considered vulnerable. For context, Iowa State notes that 10% to 30% is common among Iowa farms.
Debt-to-asset says nothing about cash flow. A farm can look strong here and still be tight on cash, as the sample farm below shows.
3. Debt coverage (repayment capacity)
What it is: How many dollars of income are available for each dollar of principal and interest due this year.
The formula: Net farm income from operations, plus depreciation, plus interest, plus off-farm income, minus family living and income taxes. Divide that by this year’s principal and interest payments.
Common scorecard ranges: 1.75 or higher is considered strong. Under 1.25 is considered vulnerable. Below 1.0 means income available for debt payments doesn’t cover them.
Lenders often figure this on term debt only, meaning the principal and interest on loans longer than a year, so their number may differ a little from one that includes operating-line interest.
Family living is part of the formula, so the family living number matters. An estimate that runs low makes coverage look better than it is.
4. Operating profit margin
What it is: Net farm income from operations, plus interest, minus a value for your own labor and management, divided by gross revenue.
What it tells a lender: How much of each dollar of revenue is left as operating profit after expenses and a charge for your own labor and management.
Common scorecard ranges: 25% or higher is considered strong. Under 15% is considered vulnerable.
Context matters here. Iowa State’s guide puts average operating profit margins on Iowa farms at about 6% to 10%, so plenty of farms land under 15% even in an ordinary year.
5. The trend
One year is a snapshot. Lenders commonly look at three to five years. Is net worth growing? Is debt-to-asset falling? Is debt coverage improving?
A weak year inside a steady trend reads very differently from a third weak year in a row. If you have prior-year balance sheets, line them up side by side before the meeting.
A sample farm: rich on paper, tight on cash
Here’s how the numbers look on a sample farm with about $1.1 million in gross revenue:
Net worth: $4.2 million in assets and $1.05 million in debt, for $3.15 million in net worth
Debt-to-asset: 25%. Strong range.
Current ratio: 1.50 ($480,000 in current assets, $320,000 in current liabilities, $160,000 in working capital). Cautionary range.
Debt coverage: 1.20 ($150,000 available after expenses, family living and taxes, with off-farm income included, against $125,000 in principal and interest). Vulnerable range.
Operating profit margin: 5.5%, after a $60,000 charge for the operator’s labor and management. Vulnerable range, and just below the 6% to 10% Iowa State cites as typical.
Same farm: $3.15 million in net worth and $25,000 of cushion after this year’s payments.
For a farm like this, the lender’s questions tend to center on cash flow rather than net worth: next year’s projected income, the marketing plan for grain in the bin, and how the operating line gets paid down. (Sample numbers for illustration only.)
What lenders commonly ask for
Requirements vary by lender and loan size, but this list covers what many ask for at renewal:
A year-end balance sheet, with the prior year for comparison
An income statement, or the last two to three years of tax returns (Schedule F)
A cash flow projection for next year
A debt schedule listing each loan, its rate, payment, and maturity
Crop insurance coverage, grain inventory, and your marketing plan
Breakevens for next year’s crops (see Know Your Breakeven Before You Need It and How to Calculate Your Corn Breakeven)
Pulling it together
None of this takes special software. A balance sheet, an income statement, and a debt schedule, on paper or in a spreadsheet, give you all five numbers, and prior years’ versions give you the trend.
If you’d like them in one place, the Farm Financial Health Dashboard puts your balance sheet, debt schedule, 12-month cash flow, 20 financial ratios, and a 5-year trend in one Excel file, and it prints the lender pages as a set.
Each lender sets its own criteria, so these ranges are a reference point, not a pass/fail test. Knowing where you stand before the meeting can make it a conversation about your plan instead of a surprise.
This article is for educational purposes only and is not financial, tax, legal, or lending advice. Consult a qualified professional about your operation.
Sources: USDA ERS farm income forecast (September 2026); Federal Reserve Bank of Chicago AgLetter (August 2026); Iowa State University Extension, Financial Performance Measures for Iowa Farms (AgDM C3-55); University of Minnesota Farm Financial Scorecard.