Debt has been a hot topic across the Ag community recently and not really because it has been good news. Credit conditions are tightening. Some producers have had back to back loss years and some are fighting to hit breakeven. Needless to say the definition I always refer to for a farmer is now ringing more true than ever – “Land Rich and Cash Poor.” So, how can you navigate through these times and lessen that credit crunch that’s causing you grief? I’m about to tell you.
The first step as with any problem is admitting you have the problem and that it needs fixing. Yes, there have been forces weighing on your operation out of your control – commodity prices below the cost of production, weather issues, breakdowns, etc.. Yes, these issues were out of your control, but they still caused a problem that needs fixing. No matter who or what caused the problem it’s not going to get fixed until it is recognized and addressed. No one blames you, but you will blame yourself if you turn a blind eye. Get ahead of that eight ball friend!!
Once you figure out the source of your problem and the extent of it then you need to begin to devise plans. Be ready to make multiple plans! Start of with an initial plan then tweak based on some research you do. Then get your banker on the horn and set up a meeting. Lay out your problem and ask “What can you do to help me fix this?” They should be able to give you immediate feedback on the feasibility on portions of your plan then need time to go through the rest. Be aware though, most of the time they aren’t going to come back and say, “This plan is perfect and we will do this exactly like you are asking.” Be prepared to whip out your plan b, negotiate, and make some concessions. However; don’t think your banker’s first plan is perfect and you should say “This plan is perfect…” As with anything, the middle ground is what is going to be easiest to execute. Know what you need, but also have an open mind. Hardly ever is anyone’s first plan the best plan.
Don’t be afraid to talk to your banker about any of this. I promise they want to help you. The better set up you are for success the more likely they are to get paid and get more of your business in the future! Know your numbers, be prepared, have an open mind, and be prepared to negotiate! If you are willing to negotiate and they are not remember- They are not the only show in town. BUT please don’t go into a meeting saying “If you won’t do this I’ll take my business elsewhere.” Either party stating upfront they won’t negotiate is a sure fire way for any plan (no matter how good) to fail.
Set yourself up for success! Face those credit issues head on and I promise you will thank yourself later. Peace of mind is worth a lot!