Credit may be available for ag producers even in this dicey economy but lenders will be dumping shaky borrowers, says Dave Kohl, agriculture and applied economics professor emeritus at Virginia Tech University.
Speaking at the National Agricultural Bankers Conference in Des Moines, Iowa Nov. 18, Kohl called questionable borrowers the stray dogs of credit. "Lenders are going to be trimming portfolios,” he says.
He suggests bankers consider cutting off borrowers in these categories:
- Paper millionaires with little earned net worth.
- Those with credit scores under 650.
- Marketing and risk management home run hitters.
- Those who feel they're too big to fail or too big to manage.
- Borrowers with credit card debt amounting to more than 15% of net income.
- Those with high maintenance lifestyles and expensive ‘toys.'
- Customers with split lines of credit from more than five sources.
- Those insisting they need the money "yesterday.”
- Blame game borrowers who say others caused their problems.
"The numbers on borrowers are important but problems usually occur 6 months to a year outside the numbers. Numbers verify what you see on the ground,” Kohl says.