We had the same problem with the qualification numbers. We had to create
more income! We suggested he place an ad in the paper looking to lease
the rights to harvest on the farm. We secured a firewood agent and a fence
post company who would guarantee a monthly income that would indeed support
the debt. We were successful in arranging with another bank the facility
for a "line of credit" high enough to support both the need for a consolidation,
as well as the purchase of the portable sawmill.
We really cannot fault his Bank for their original decision, but to
seek a solution to the problem should have been within the Bank's mandate.
The Bank's inaction precipitated their decision not to go back to that
Bank once we had found the solution. They have pulled everything out of
that bank.
The lesson here is aimed at lending institutions in general....take the extra time to seek a solution to a deal that makes sense, rather than just saying "no", your credibility is at stake. In our case, we had a farm worth $135,000 with no mortgage. Our Clients were looking for $50,000 to create cashflow (ie. the sawmill). Eventhough Joe & Julia are retired and (chronologically) elderly, the loan makes sense from a security point of view. We not only offered the mortgage as security, but we also offered an "assignment" of rents and leases, giving the Bank the authority to receive payments directly from the firewood Agent, and/or the fencing Company.....a safe loan.