10 Tips From Your Banker


Tough times expected ahead? The American Bankers Association has some thoughts  on that.

“Thanks to recent boom times, many farmers and ranchers are well-positioned financially for the next couple of years, but falling commodity prices, a stronger dollar and a probable increase in interest rates should encourage all producers to get their financial house in order,” says ABA senior vice president Steve Apodaca. “One of the most important things a farmer can do during volatile times is keep the lines of communication open with his or her lender.”

In that spirit, ABA is sharing 10 tips the organization says can help producers prepare for ongoing changes in the agricultural economy.

  1. New expenditures should generate cash flow to pay for itself over a reasonable amount of time. If it can’t do this, you may want to defer that purchase.
  2. Create a farm budget that will track all income and expenses – and update it frequently.
  3. Check to see if you are getting the maximum return from investments, and consider selling any non-farm assets that aren’t’ generating a maximum return.
  4. Review short-term and long-term debt structure – it may be worthwhile increasing long-term debt to pay down short-term debt.
  5. Have information such as current inventories, cash flows and balance sheets ready to share with your banker.
  6. Ask your banker about USDA guaranteed farm and rural development loan programs. It may be worth it for both of you to visit a USDA Service Center together to learn more.
  7. Review any hazard and fire insurance coverages, and consider eliminating coverage for obsolete or low-risk items.
  8. Review life insurance policies – converting to a less-expensive term policy from a more costly whole life policy could make sense in some instances.
  9. Don’t push off financial problems, deal with them immediately. Talk to your banker early and often.
  10. With all due respect to No. 9, balancing your life is as important as balancing your budget. Keep a clear perspective by taking some time away from business problems.

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Spell Check

Northwest , OH
9/22/2015 08:57 PM

  Number 8 is poor financial advice. Farmers usually don't have temporary insurance needs so what is the logic in giving up a permanent insurance policy that is less expensive in the long run for a temporary policy (term) that will get more expensive with age? So they can buy permanent again in the future when they do legitimate succession planning at an advanced age/higher cost? I don't think so!

Western, NE
8/22/2015 06:50 PM

  Well as one that has sat on both sides of the lending table, it doesn't matter what your debt load is, if you can't cover your cost of production due to low commodity prices it won't matter what you do, your lender will want you to liquidate assets to pay off debt. What happens when there is an over supply of hard assets on the market and no buyers? Same thing we're seeing in the commodity markets. 2016 is going to be a challenging year. With prices crapped out on all the commodities, will input suppliers drop their prices or will the farmer have to do without thereby potentially further eroding their ability to repay debt? Kudos to those that thought high prices would be here forever! How do you get the crap back into the goose!


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