The Struggles of Working With Your Ag Bank During Difficult Times

In today’s economy, it’s no secret that farmers, ranchers, and agricultural business owners are facing significant financial challenges. Concerns include fluctuating prices of goods, rising operational costs, and the added difficulty of working with banks that may themselves be navigating troubled waters. In this blog, I want to discuss the key factors that can help you maintain a strong relationship with your bank during these challenging times.

1. Understanding the Bank’s Fear – And Not Taking It Personally

Just as you’re concerned about your operation’s future, banks feel the pressure, too. This anxiety often results from seeing other farms’ financial struggles, which may affect how they view your financial health. Your banker might unintentionally project this fear onto you. So, if you sense caution or hesitancy from them, it’s often more about the overall financial environment than about your operation specifically.

2. Why Organization and Financial Structure Are Your Best Defense

Bankers value customers with clear, organized finances. Structured finances not only improve your standing with your bank but also give you more control in discussions. By bringing in detailed reports and demonstrating a strong grasp of your numbers, you’ll set yourself apart from most of your neighbors. This not only builds trust but positions you as a reliable partner in the bank’s eyes, even in difficult times.

3. Recognizing When Banks Manipulate Numbers

One red flag to watch out for is if your bank tries to "adjust" financial projections by including external income or changing cash flow expectations to make the numbers look better. Banks do this to satisfy loan committees and secure approvals. However, this can distort your actual financial picture and may not serve you well in the long run. Be insistent on integrity in reporting, and if you’re suspicious, request to review the numbers they present on your behalf. It’s important to make sure your bank is accurately representing your financial health without alterations.

4. Keep an Eye on Your Bank’s Own Financial Practices

It’s not just farmers and ranchers who are exposed during economic downturns—banks are too. Take note of how your bank is handling these times. Are they calm and steady, looking at things from a long-term perspective, or are they reacting with fear and making impulsive decisions? If you sense financial instability in your bank, it might be time to consider other options. A bank that’s secure, transparent, and consistent in its practices will provide a more stable partnership through economic ups and downs.

Staying on Top

Ultimately, your success comes down to knowing your numbers and taking control of your finances. By doing so, you gain leverage, confidence, and the ability to work with any bank on your terms. Keeping your financials organized and transparent puts you in the top 1% of ag business owners and provides peace of mind in any economic climate.