lender meeting

Advice for new ag lenders

As an experienced lender, you may notice some new, younger faces in your office. I am familiar with this experience because as an educator, each new group of students seems to be younger. It is as the ancient proverb says, “time and tide wait for no man.”

Within five years, one half of Farm Service Agency staff will be gone. The trends are similar within the Farm Credit Associations and other agribusinesses. From my observation, I believe the economic downturn occurring in some agricultural sectors and rural America will accelerate retirements. Before 2021, 95 percent of the banking institutional memory from the 1980s will be retired. Recently, a Farm Credit CEO shared with me the tales of a disastrous Monday that occurred as a result of a century’s worth of experience retiring the previous Friday. The void left was undoubtedly, quite noticeable.

Increasingly, new lenders will be less familiar with agriculture and farm backgrounds. Further, expect individuals from varied backgrounds, national origins as well as perspectives to enter agricultural lending. Often, I have the privilege of conducting training for many of these new lenders and in my observation, most of them are eager to learn and provide good service to their clients.

From my perspective, I offer the following thoughts to new lenders:

Be a quick study of your client, their business and overall industry trends. In the agriculture industry, change can occur rapidly which affects your client. Make the time to understand new technology, innovation and practices. This is critical to a good lender-client relationship.

Be prepared to listen. I have heard it said, “We were given two ears and one mouth because we should listen twice as much as we speak.” The more experienced producer may test the relationship with a new lender. Be prepared to accept the challenges and then, move forward.

Cultivate the relationship. The current economic conditions are perfect for education and growing a side-by-side relationship with a producer client. However, that requires acceptance from both lenders and producers of changing times and challenges. During times of good profit, the lender-producer relationship can often be about the lowest interest rate. In more difficult times, it is about education and solutions. In almost any scenario, the relationship between the lender and producer is critical.

Do not rely solely on the numbers to identify potential problems. Credit issues and other problems start outside the numbers first. Death, disease and divorce are obvious issues that do not discriminate. However, I have noticed lately that disinterest is also a serious issue. Whatever the challenge, some producers have the ability to successfully weather a major setback. Other producers may not. As a good lender, make it your job to understand the difference.

Lenders must play several roles including teacher, coach and facilitator. Sometimes, education is required. Other times, congratulations are appropriate or perhaps, corrective actions. Often, facilitating a workable solution or plan is the lender’s job. Regardless of the required role, long-time lenders find the greatest satisfaction in relationships they develop with their clients year after year.

In summary, there is much to learn from older, more experienced lenders. However, in the absence of such opportunity, there are still several ways to serve your clients and industry well. Stay acutely aware of the industry in which you work as well as that of your clients. Be willing to serve in whatever capacity needed whether that is educating, problem-solving or just listening to your client. At the end of the day, you may find that a strong business friendship not only improves your success as a lender, it could also be quite rewarding. 

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