Finding Financial Success in a Tough Profit Picture was just one of the many insightful sessions I attended during our 2019 Top Producer Summit last month in Chicago. My thanks to Jessica Lehman, First Financial Bank; Kala Jenkins, K.Coe ISOM; Angie Treptow, Farm Credit Services of America; and Sarah Beth Aubrey, moderator, for their practical and timely recommendations. Here is a handful for your consideration.
1. Look at your cost structures. Identify all your variable costs and fixed costs. Farmers understandably focus on cost of land, equipment, seed, herbicides and fertilizer. Don’t forget things like taxes, health care, personal items, improvement to facilities, additional payroll, family draw and profit. Align your cost structures to the current times. For more information, go to: https://bit.ly/2AWdXZe
2. Record all transactions and categorize them for easy reference. This helps prevent forgotten or unaccounted for purchases that can change your loan repayment capacity and your farm profitability.
3. Review loan documents with your lender. Set up a preliminary closing with your lender and go through loan documents line by line, because you may still be able to negotiate changes and improve the features of the loan before you sign.
4. Take your partner with you. If you’re married or have an off-farm business partner, that individual needs to attend financial planning meetings with you. If not, things discussed are often left out or watered down by the time you go home and try to repeat what your loan officer said.
5. Know your lender as well as they know you. You can determine the financial strength of an institution by checking your lender’s financial report (a call report). Commercial banks must file that information with the Federal Insurance Deposit Commission (FDIC) on a regular basis. Go to www.fdic.gov for more information. If you work with a Farm Credit System Association, check for annual and quarterly reports on their respective websites.
6. Consider your bank’s maximum lending capacity. If you’re in growth mode or looking to restructure a loan, for instance, ask the lender to tell you about their maximum lending capacity to make sure you’re not going to bump up against their ceiling.
7. Be in control of your relationship with your lender—not the other way around. Be proactive in reaching out to them with questions and information, via email or a phone call. Share what’s going on with your operation and other farms in your area--particularly if your lender is not located nearby.