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the past two years have been $58,549. The only long term debt on the ranch is a car loan <br />with Wells Fargo, with a current payoff balance of $10,019. The estimates value of the <br />ranch is $2,500,000. <br />Upon completion of the project it is estimated that hay production will increase from 2 <br />tons per acre to 6 tons per acre. Therefore, with 150 acres of irrigated hay production, it <br />is estimated to increase from 300 tons per year to 900 tons per year. Assuming 70% of <br />the 900 tons of hay produced is sold as horse hay, the ranch's projected annual income on <br />hay sales would be $113,400 (0.7x900x$180/ton). This is an increase of approximately <br />$70,000 in revenues from the improved well production. All maintenance cost would <br />remain the same with the exception of the twine costs and labor. The estimated annual <br />increase in costs would be $6,000 for twine and $7,500 for labor. This would increase <br />the ranch's total annual expenditures from $58,549 to $72,049. <br />The ranch's current income to debt ratio is $76,790 divided by $58,549 = 1.31. Under <br />the proposed scenario, the ranch's income to debt ratio would be $113,400(hay) + <br />$42,000 (avg. cattle) divided by $70,387 = 2.21. The debt ratios calculated do not <br />include debt services. <br />A detailed accounting of the ranch revenues, expenses, liability and assets is contained in <br />Appendix E. <br />Collateral <br />The pledged collateral for the requested loan is an 80 acre tract of land. The tract of land <br />is located within the boundaries of the ranch in the south %2 of the northeast 1 /4 of Section <br />18. The land is located between Comanche Creek Road on the west side and Comanche <br />Creek along the east side. The land has easy access off Comanche Creek Road and has <br />nice views of the creek bottom. Comparative land in that area goes for approximately <br />$2,500 per acre for a minimum 80 acre building lot. The estimated value on the land at <br />$2,500 per acre would be $200,000, which is 1.3 times the value of the loan. The ranch <br />is in the process of obtaining an appraisal to certify the value of the land. An aerial map <br />illustrating the location of the proposed land being used as collateral is contained within <br />Appendix E. t�.�� S,t�1 -�- t�Q���x �.� <br />�-� a <br />Alternative Financing <br />The ranch has investigated alternate financing for the proposed improvements with <br />Sunflower Bank, out of Colby, Kansas. Sunflower Bank has been the ranch's long time <br />banker providing financing for many farm improvements (equipment, land, buildings, <br />etc.). Contained in Appendix F is a letter from Darrell Pabst, Vice President of <br />Sunflower Bank, indicating that the proposed project does not meet their funding <br />guidelines. <br />11 <br />