DOLLARS & CENTS
Only Wish
Dr. David Kohl energizes agricultural
lenders,
producers
and
business
professionals with his keen insight
into the agricultural industry through
extensive
travel,
research, and
networking around the globe. He
is a Professor Emeritus of Agricultural
Finance
and
Small
Business
Management and Entrepreneurship
at Virginia Tech, Blacksburg, VA.
Dr. Kohl has traveled over 8 million
miles in his career and conducted over
6,000 workshops and seminars for a
variety of agricultural audiences.
Additionally, Dr. Kohl’s personal
involvement
with
agriculture
provides a unique perspective into
the future trends of the agricultural
industry and economy.
10 HEARTBEAT | FALL 2017
Recently, I served as one of the instructors at a school for agricultural
lenders. To spur discussion, I presented an exercise where lenders fill
in the blank at the end of the sentence, “I wish my producer customers
would ____.” Wow, did this energize the room! Actually, it provided an
interesting perspective especially given the current economic climate in
the agriculture industry. Let’s drill down and examine some of the class
responses.
One of the most common responses from the teams of five
was a wish that their producer customers, as well as others that are
applying for loans, would provide accurate financial statements. This
includes balance sheets with reasonable asset values, a list of inventory,
equipment, and livestock. On the liability side, lender groups responded
that they wanted transparency concerning all debt obligations. Lenders
noted that overdue, open accounts for repair and maintenance, feed, or
fertilizer, along with the commingling of family living and private loans
were some of the sizeable missing numbers.
Another recurrent wish from lender groups was credit scores
of their customer’s business partners, spouse, and others involved
financially in the business. This invited further discussion of credit
card debt and other consumer debt obligations. While these numbers
are usually not business-related, they certainly can impact the overall
financial picture.
Another related response from many of the groups was family living
costs. And the issue of commingling surfaced once again in the context
of farm expenses. Lenders wish their producer customers would more
clearly delineate business expenses from family living costs. According
to surveys from my online webinars and from recent lending schools,
family living expense is the second highest enumerated cause of
financial stress behind challenged profit margins.
Next on the list of group responses was communications with the
lender. The general feeling among each of the lender groups was they
do not like surprises. One lender shared the example of his client who
purchased machinery and land out of his operating loan because of cash
flow issues. Delaying communications with your lender when financial
problems arise only intensifies the situation. Further, trying to evade
responsibility erodes your business relationship with the lender as well
as your reputation and credibility. Also regarding communications,
lender groups wished their producer clients would include spouses
and partners on financial discussions including transition, growth, or
expansion.