Answering Questions About Timber Financing 
Cameron Rowe, Financial Services Officer, Escanaba 
Michigan or Wisconsin Timber


Timber is a different business than any other. Timbermen need to purchase before they make a profit, their equipment depreciates at a rapid rate, and every step has to be done keeping the health of the regenerative product in mind. GreenStone recognized this, dove in and learned it, and now has a long history of working in this industry. As a result, we understand the specific needs for operating loans, equipment loans, leases, mortgages, and letters of credit.  


Application process 

One of the biggest questions prospective members have is about the application process.  Most of the time, timber financing deals require traditional underwriting, three years of complete tax returns, and a complete balance sheet. For new prospects, we have found it beneficial to them to walk them through all the documentation that is needed. 


At GreenStone we’re able to do this both virtually and in person. We know this is a detailed process, particularly for new members. We help them through the application, which helps them understand why things are needed and makes it easier to know what to expect the next time they apply. There are five main items applicants need:  

  • Certificate of Authorized Representative (for borrowers with legal entities) 
  • Signed and dated application 
  • Copies of drivers’ licenses 
  • 3 years of Federal and State Tax Returns along with depreciation schedules 
  • A complete market-based balance sheet for all entities and individuals co-signing or guaranteeing the loan(s)  


Underwriting and depreciation 

Customers also want to know about GreenStone’s underwriting standards and how depreciation plays into them. Due to the intense wear and tear timber equipment experiences, it depreciates more quickly than standard farm equipment. For example, in a matter of three years, a piece of equipment can go from being worth $700,000 to $375,000. Since we’re familiar with the intense replacement schedule loggers are on, we like to work with our customers to make the best choices on financing equipment – whether it be regarding term of loans or down payment.  


GreenStone has four core underwriting standards as it pertains to timber: 

  • Repayment history (captured by credit bureau details) 
  • Owner equity 
  • Repayment capacity 
  • LTV (loan-to-appraised value).  

For young or beginning operators, GreenStone also has more flexible standards to accommodate those who we see as the lifeblood of the industry moving forward. 


Letters of credit 

Timber operators commonly are asked to put up a cash bond on sales before they cut the wood on the property, and many don’t want to tie their cash up in those deals. To assist them, a timber operator can pledge collateral, and GreenStone will write them a letter of credit. This is a service we provide that differentiates us from many other financial institutions. As a bonus, our Irrevocable Letters of Credit do not typically accrue interest, can be originated with a reasonable fee, can be written for up to seven years, and are renewable. Many of our timber customers use them and like the business opportunities they afford them by preserving their cash position. 


Real estate 

Timber operators buy land with the purpose of harvesting the timber. When they require financing for the purchase, GreenStone requires 65% LTV on vacant timberland as we expect borrowers to select-cut the property at some point during the course of the note and we want to protect their equity position as well as GreenStone’s collateral position. In many circumstances, members will resell the land after a cut and regrowth period as either recreational land (e.g., for hunting) or as residential property tracts for rural homes. This practice – if done responsibly – is both a good way to maintain healthy forests and promote tourism and rural living across GreenStone’s territory.  


Sustainable Forestry Initiative (SFI) Training  

Each year, GreenStone holds a free SFI training course to assist timber operators in maintaining their accreditations with SFI and regional associations like the Great Lake Timber Professionals Association (GLTPA) and Michigan Association of Timbermen (MAT). We work with the timber industry to help maintain a high standard of education and training to ensure a sustainable future for Michigan and Wisconsin’s forests. Our annual trainings are typically held in late March, often in both the Upper Peninsula and the northern Lower Peninsula of Michigan. GreenStone staff are joined by industry experts, mill representatives, legislators, and association partners to put on a session of engaging presentations. These meetings also provide a valuable networking opportunity for those who share the trait of having sawdust in their blood. We hope you will be able to join us at a future training event! 


If you have any questions about timber financing, please contact our timber financing expert, Cameron Rowe, in Escanaba.  



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