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Corn+Soybean Digest

How Lenders Let the Air Out Of Their Customer’s Financial Balloon

Judging from this column’s title, I bet you are thinking a producer or a group of producers must have just had their credit requests rejected. To the contrary, a recent panel of producers identified what disturbs them when dealing with their agrilenders – other than credit denial.

One story was related to financial documentation. The producer and his spouse are excellent record keepers with financial records, ratios and benchmarks that they use in their business. They prepared a financial package, along with a business plan, and presented it to their agrilender. His response was, “Fine. I really don’t use it but it will help when the examiners come around.” They then asked if the documentation demonstrating financial progress could assist in negotiating a better rate. His response was that all customers are offered the same interest rate. To say the least, this outstanding young farm and ranch couple found a new lender.

Another spouse on the panel indicated that when she and her husband met with the agrilender, she was completely ignored; however, she is the one who is responsible for the financial records and marketing. Again, a switch of lender was made.

A few producers said that their agrilender had not visited the farm or requested financial information in the past two years, which made them think the lenders were too busy or didn’t care.

A final put-off discussed by the panel was despite generating a positive trend in cash flow and profitability, the lack of collateral or “dirt” led to rejection because it indicated too much risk according to the lender’s quick scorecard. Is this a case of “high tech-no touch” lending?

Yes, these are a few examples of turnoffs; however, there are many excellent agrilenders positioned to be solutions-based providers who need to be part of your business team.

Editor’s note: Dave Kohl, The Corn And 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 sullylab@vt.edu.

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