How should you choose a lender? Look for a good partner!
The definition of a partnership is to carry on a business for the purpose of enjoying a joint profit. In other words, it’s a win-win relationship that leads to success for all partners. So, what you’re really looking for is a lender that will make a good business “partner”. Successful ag operations require many good partners such as: seed and chemical providers, equipment dealerships, repair shops, parts houses, sale barns, veterinarians, and the list goes on. Here are three things to consider in your search for a good lending partner:
- Your lender needs the ability to understand and evaluate risk. Farming is risky business, right? It’s been compared to gambling on many occasions. Each year producers roll the dice on things like – the effects Mother Nature will have on their crops and livestock, how politics will impact the price they’ll receive (sometimes on a crop they planted 10 months ago) and many, many more… So, does your lender put this risk in perspective? Does your lender understand these risks and how they can be mitigated? Will one hail storm send your operation into a tailspin, or will you and your lender work through that difficult year and find ways to lessen the impact? You and your lender should take a partner’s approach to reviewing your business at least annually. This means looking beyond the obvious numbers and discussing what is going right and what areas need improvement or possibly elimination. Look at the trend of your operation. Was that hail storm just a hiccup in what has been a trend of profitable years or have you seen financial weakening for the last 4 or 5 years? Would restructuring some debt be beneficial in turning things around? Your lending partner should help you evaluate your risks and avoid future pitfalls.
- Your lender needs the ability to be a good resource and sounding board. A good partner will bring value to the partnership. Since your business is farming/ranching, look for a lender that has that same focus. Ag producers often have a passion for agriculture and the same can be true of ag lenders. Many ag lenders have an ag background that has driven them to maintain close ties to the industry. Although a lender has to maintain confidentiality for all customers, he/she may have wealth of information and experience that enables them to provide insight as to what is working and what is not for operations similar to your own. Of course, each operation is unique and you know your business best, but a good lender may get you to thinking about why you make some of the decisions you make. If it’s a sound decision, you should easily be able to explain and defend it. If it’s not, just having the discussion may bring that to light.
- Your lender’s responsiveness and desire to be proactive. Things can change quickly in a farming or ranching operation. Chose a lender that has the desire to know your operation well enough that he/she can be responsive to your needs. You may have an opportunity to purchase a section of land from a neighbor at a reasonable price if you can act fast and make the process easy for them. Chose a lender that can quickly evaluate the situation, move forward, and work with you to make it happen if it is in fact a good opportunity. Along those same lines, have you ever had a lender contact you to let you know they can lower your rate? You’re probably asking, “Why would a lender do that?” My answer is…a proactive lender will be looking for opportunities to better your operation and contribute to your financial health for the long-haul and the continued success of the partnership. When interest rates decline, opportunities are sometimes created – like if you have a variable rate loan and the timing is right to consider locking in a fixed-rate loan. Your lending partner should be looking for opportunities and proactive in discussing them with you.
Premier Farm Credit loan officers are looking for strong partnerships and love a good success story. We’ll work with you to evaluate and mitigate risks, discuss ways to improve your operation, and be responsive and proactive in helping you to create your own success story!
