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Lender as the “What If” Person


My travels took me to Omaha, NE, to teach the 8th Advanced Agricultural Lenders School. Flying in from Big Sky, MT, where the temperatures were in the 30s F, was a stark contrast to the 100° F heat and humidity of eastern Nebraska. A look out the airplane window demonstrated the power of the Missouri River. I could only see the roof peaks of barns and houses in the flooded area, and the airport was surrounded by water, with the levees just able to circumvent floodwaters.

I asked the advanced ag lenders representing six states to share some of their new lending ideas with the group.  One idea was very applicable to producers.

This group indicated that it was the role of a lender not to be just a “yes” person.  Occasionally, while being emotionally daunting to a producer in the short run, the answer “no” may be best in the long run.  Many shared stories about saying no to a producer’s loan request and then having the producer show up years later to say thanks.

One lender had a novel idea about being the “what if” person.  It is important for young producers and experienced producers reading this column to know lenders in agriculture are facing intense pressure from internal credit review teams and outside regulators.  In lenders’ loan narratives they are being asked to shock test revenue, costs, interest rates, working capital in inventory and prepaid expenses, etc.  They must explain what if this happens and how they would navigate around the turbulent economic waters that are appearing almost daily. The big what-if concerns land values and how a 10%, 20% or 30% decline will impact the collateral position of the borrower.

In summary, producers must work with their lender in the what-if game.  While being intimidating and frustrating at times, sometimes it is necessary to develop proactive plans just in case.  Neither lenders or producers like surprises, and asking the what-if questions can keep the economic waters from breaking the financial levees and backstops.


Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at

TAGS: Management
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