Skip to Content

The three “Cs” you want in an ag lender

One of the most important teammates you’ll have in your farming or ranching operation is your bank, but what makes a good agriculture bank and lender?






Lenders have significant influence on the eventual financial outcomes for you and your family. And, their interactions with your farm can have long term effects – both good and bad. Since your lender and bank can have such a profound impact on your financial life, it’s wise to take a step back and simply research what makes a good agriculture bank and lender.

I am very appreciative of a few quotes that have framed much of my core lending philosophy. One of which is from the famed and revered Dr. David Kohl, a professor and ag lending expert. Dr. Kohl has often encouraged ag lenders to be “conservative in the good times, courageous in the tough times and consistent above all.” I couldn’t agree more.

Conservative in the Good Times

Being conservative in good times is one sign of what makes a Good Agriculture BankYou may think it doesn’t matter what bank you work with when times are good, but as an old adage states, “The worst loans are made in the best times.”

When times are great, it’s easy to believe they will roll on forever – a term some refer to as the “recency bias.” This is often when leverage is piled onto the balance sheet and payment obligations are taken to an unreasonable level. What makes a good agriculture bank is an institution that will keep you “rowing close to shore,” even when others might be straying far from it.

In the last great boom in production agriculture, the wise decision was to reduce leverage and pile up working capital in preparation for the next period of leaner times. A good banker encourages this kind of thinking – even if it results in lower loan totals for the lending institution.

Courageous in the Tough Times

The past few years have not been easy for those of us working in the agriculture industry. While it is true that banks have undoubtedly had to make some adjustments during this period, I believe, for the most part, many are remaining steadfast in support of their customer base.

The last thing any producer wants is for their bank to pull back during the most challenging times. So, how can you help your bank be courageous in tough times?

It is critical that borrowers proactively address any issues the bank expresses concerns about. Also, be quick to make sure that you are doing everything you can to make the bank confident in the security of their loans with you. This kind of working relationship – marked by strong communication and mutual respect – will result in both parties finding favorable outcomes.

Consistency is part of what makes a Good Agriculture BankConsistent Above All

Many items on your worry list are simply outside of your control – timing, rainfall amounts, market price direction, weed resistance, death loss in your cattle operation, etc. Agriculture is inherently an inconsistent business. Therefore, it is prudent to remove uncertainty as much as possible in other facets of your operation.

A hallmark of what makes a good agriculture bank is consistency. In an up-and-down business like agriculture, it’s easy for cash flow performance and collateral values to move around significantly. Thus, when you consider your lending partner, it’s appropriate to ask how they handle the cyclicality of the industry, and why they feel they have strong staying power in the industry.

What makes a good agriculture bank? Conservatism. Courage. Consistency. These items are sure signs of being a great ag bank. As you consider the choice of who you will work with – I encourage and challenge you to demand a lending partner who exhibits all three.

Interested in learning more about how to partner with UMB’s Agribusiness team? See what we mean when we say, we’re a partner for all seasons.graphic line break

Based on this post, we think you might also be interested in reading the following content:

The ‘Royal’ match that’s making a difference in KC

Farm and Finance: 6 topics on your banker’s mind

Is the U.S. entering a trade war with China or a trade spat?

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

287 / 373

Leave a Reply

Required fields are marked

Currently you have JavaScript disabled. In order to post comments, please make sure JavaScript and Cookies are enabled, and reload the page. Click here for instructions on how to enable JavaScript in your browser.

When you click links marked with the “‡” symbol, you will leave UMB’s Web site and go to Web sites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other Web sites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.