Third, borrowers should not provide inaccurate information to their lenders, voluntarily or not. Accurate information allows lenders to determine how to structure the loan, to ensure that a borrower is able to repay the loan and to ensure that there are sufficient guarantees to cover the loan amount when the borrower is unable to repay the loan. Inaccurate information can be considered fraudulent and result in loans and judgments that can never be paid. Finally, loans are cross-cutting documents that govern the financing of borrowers. As a general rule, loan agreements repeat the terms of different loan documents, impose other rights and obligations, and generally bind all parties to the financing agreement. Although loan contracts are common, they are not always entered into under the standard farm loan and the absence of a loan contract does not affect the validity of other loan documents executed. Fourth, borrowers should avoid creating circumstances in which a lender may be required to make a “protection advance.” A protection advance is essentially the lender`s right to make certain payments to third parties if the borrower does not. Protection advances may most often be made when a borrower does not pay their taxes or rents. In such cases, the lender may pay taxes or rents on behalf of the borrower to prevent the deposit of a tax or the lessor`s pledge, and then add the amount of the payment to the borrower`s main loan balance. The need for a lender to make a protective advance often signals non-performing credit and indicates that there are larger operating problems. Security agreements are the documents by which borrowers or guarantors grant the lender a shareholding in the personal property that serves as collateral for a loan. In the agricultural context, security agreements often cover things such as current and future crops, cereals, livestock, equipment and receivables, but in many cases, a security agreement covers all personal property belonging to the person signing the security agreement. Security agreements are subject to laws other than mortgages, but security agreements are similar to mortgages in many respects.

In other words, when a borrower is defaulted on a loan secured by a security interest, the lender may impose the sale of the personal real estate mentioned in the guarantee agreement and the proceeds of that sale are used to repay the underlying loan. First, farmers should not sell real estate that is collateral from a priority lender without obtaining the lender`s consent or paying the proceeds back to that lender. This principle applies to large tracts of arable land as well as small raw materials such as cereals and livestock. Farm loans are often granted to allow farmers to acquire or produce collateral and older lenders generally have the right to be paid first on the proceeds of the sale of this property. Mortgages are the documents through which borrowers or guarantors grant shares of real estate to lenders. However, borrowers do not provide current ownership of real estate through mortgages. Instead, they provide a mortgage interest that promises real estate as collateral for a loan. If the borrower is late for the loan, the lender can close the mortgage and force the sale of the mortgaged assets to repay the loan. The enforcement process is very varied and is subject to state law, but in short, a Minnesota foreclosure sale can be made with or without judicial participation, requires different pre-sale periods, includes an auction by the local sheriff`s office, and includes a period after the sale, during which time the person who gave the mortgage can retain the property in question and repurchase the bulk of the property.