Working with your ag lender

Farming comes with its own set of risks. As a farmer, it is important for you to develop a strong working relationship with your lender. You should view this relationship as a partnership with the goal of long-term success for both parties.

Like any relationship, this one should be built on honesty, trust, communication and understanding by both parties. If one of these components is missing, it’s going to be hard for either of you to have a good experience and could result in tension, or even worse, termination of the partnership.

You should have a good picture of your finances before approaching any lender and be able to justify and explain your operating decisions to them. Remember that lenders are financial professionals and may or may not have an agriculture background. Be prepared to explain production practices for a certain crop, particularly if you are producing a crop for a niche market as well as justifications for loan purchases. It may not be a bad idea to invite your lender out to see your operation firsthand.

Be honest and upfront with your lender. You need to disclose financial statement information and also outside partnerships, agreements and contractual obligations. Discuss any new business ventures, credit from other sources and significant capital purchases with your lender before following through with them. In fact, the earlier you can talk to them about these, the better, as it shows that you think purchases through before buying.

Keep in contact with your lender after you have secured a loan. Checking in with your lender periodically lets them know that you view the relationship as a partnership. These conversations should ideally start during good times. You do not want the only time you speak to be when there is a problem.

While they will rely on you for agricultural insight, realize that you will have to take into consideration their financial expertise. Sometimes, particularly in down economies, they may ask you to alter your production practices to save money. Realize both parties will have to make comprises to develop an amicable solution and keep the relationship strong.

Additional information related to the current economic downturn is available in Surviving the Farm Economy Downturn, a publication developed by Southern agricultural economists, including the University of Kentucky’s Jordan Shockley, Todd Davis and Kenny Burdine. It is available online at https://www.afpc.tamu.edu/extension/ resources /downturn-book/ or you can request a copy from the Boyle County Extension office.