How to Communicate with Your Ag Lender
Communication is key to all relationships, but what does good communication look like between cattle producers and their ag lenders? Mark Sand is the location president for his bank and was raised in the business of farming ranching. He shared the key components of building a strong relationship with your ag lender in Season 6, Episode 51 of the Casual Cattle Conversations podcast.
Good communication relies on equal effort and honesty from all parties involved. To receive the best advice or feedback possible, everyone has to be honest about what happened in the past and what is happening currently. “Communication is the most important to me and it goes both ways. If you come in and want to borrow money, you need to be honest about what happened on the farm last year. The toughest conversations I have are when people don’t communicate well and aren’t organized. Even if you are going to be late on a loan payment, just call and let your lender know what it is going on,” said Sand.
Ranchers know how to wear many hats in any given day. Whether they are feeding, treating sick animals, fixing fence or doing a number of other things; they have to be knowledgeable in many areas. Throw in being a diversified operation and the number of jobs increases exponentially. Being diversified is important, but you need to be organized and prepared for meetings with the people on your team. Review the materials they send you in advance, be able to update your balance sheet and have your tax files from last year on hand and ready to review. “Very few of my ranchers come in with business plans. My best clients come in with a plan and know what they are going to change in the coming years. Ranchers are good workers. They work hard and there is no doubt about that. However, they need to work on being more organized on the financial side and remember they are businessmen and women too,” said Sand. If you are stretched too thin, look at hiring someone to do your book work. Yes, it is an added expense but having updated records is crucial to making accurate management decisions.
Staying organized and prepared is something cattle producers can control. Weather, market prices, input costs and inflations unfortunately fall into the category of influencing factors that cannot be controlled by farmers and ranchers. However, there are steps producers can take to mitigate risk and survive the challenging years. “Typically, on every farm or ranch, their income is more diversified. Someone is usually working off the farm to provide an income source. People with diversified income sources are typically the ones who can weather a bad year. This is especially important for small and mid-sized producers who don’t have high cattle numbers,” said Sand. Take a look at your business model as a whole and think through different options to create multiple revenue streams.
Improving business management skills is especially important for the younger generation of beef cattle producers. It’s a capital-intensive business and without help from family, mentors or neighbors it becomes even harder to get started and maintain momentum. “One of the biggest differences between the senior generation and the rising generation is that the younger, rising generation thinks they need new equipment right away. Equipment is expensive. You need to budget for that expense and understand how you will pay for it,” said Sand. When it comes to being a successful cattle producer who is younger or in experienced know the genetics on your herd, treat everything like a business and find people to partner with to reduce costs where possible.
As you work through your end of year bookwork and begin to review your goals for the coming year. Remember to use or save your income from the higher markets wisely, stay organized and be honest with everyone on your team about where you’ve been and where you want to go.
