Frye: Prepare for lender meetings with these three steps

As we get closer to planting season, have you taken some time to think about the big goals you have for your operation in 2022?

I hope you set aside some time to think intentionally about where your operation is heading, the goals you will set and how you will get there.

Once you’ve done that, consider taking the opportunity to plan for how to present your farm’s goals for this year to your lender.

If you already have a meeting with your lender coming up, that’s a great chance to present them with your ideas, or you can schedule a special meeting with them to go over your plans.

The Banker’s Shoes

The key to getting the banker on board revolves around understanding their point of view: their side of the business relationship with you.

The truth is, if you have an operating loan, the bottom line is that your lender needs to make sure that their employer, the bank, is going to get paid back by the customer, you and your farm, and that they stay in compliance with banking regulations while doing so.

Because of this truth, your lender’s confidence in you will be increased by certain types of communication with you or decreased by the lack of that communication.

Especially if you’re wanting to present your lender with new ideas or new plans for your operation, you’re going to need to get them on board.

You need to be able to persuade them of not only the effectiveness of your idea, but your abilities as a businessperson and farm leader, as well.

Three Thoughts

Here are three keys to communicating your farm business goals with your lender this winter.

1. Explain the vision. As the farm’s leader, you are the one who needs to generate the vision for the operation: the big picture of where the farm is headed and why. Being able to give your lender a clear sense of where you see your operation heading in the next five years can help them get on board initially with your business plans. This includes the wider explanation of why you farm, what — and who — you expect to be involved in the operation in the future, how your farm is unique from other operations and how you plan to stay competitive.

2. Set out clear goals and exactly how you’re going to achieve them. This step is the big one, where the “meat” of the communication is going to take place. Your banker needs to be able to understand each goal clearly and then be able to follow exactly how you plan to go about achieving it in your operation. This means getting as specific as you can with financial plans and marketing plans. It’s true that no one can know with certainty where the markets will go in the coming year or how the 2022 crop will turn out, but working with a market adviser to create solid projections will give your lender some great information about how you plan to generate revenue in the coming year. Remember: they need to make sure their employer, the bank, will get paid back.

3. Prepare to use their terms. This is an important step that goes a long way in increasing your lender’s confidence in you as the leader of your farm business. When you can explain your plans using the lender’s “lingo,” which is financial terminology, they can clearly see how serious you are about running your farm by the numbers. Lenders love clients that they can see have taken the time to learn the financial “language” and then communicate with them in that way.