The right lender is more than an interest rate
Katelyn Allen, Associate Editor
February 18, 2021
Leaving potential money on the table is something no farmer wants to do. Most often, we hear this fear in terms of risk management — it’s easy to put off locking in milk prices, or even feed prices, when it seems like they could still climb just a bit more.
The same fear might be said in regard to interest rates. It’s tempting to search multiple banks or lenders to find the most affordable option for financing, and farmers may certainly do that.
The lender you use must be competitive in their interest rates, but Sam Miller and Roger Murray advise not to use that as your only decision tool. “Rate is very seldom the reason that you should bank with a financial institution,” said Miller on the February 17 Hoard’s Dairyman DairyLivestream. Miller oversees all agricultural banking at BMO Harris Bank.
“Like your feed bill, like your equipment purchases, just like anything else, you need to be testing the market. I think it’s important to be competitive, but after that part, it’s looking for the total relationship,” agreed Murray, who is the executive vice president of Farm Credit East.
“What value are you getting from your lender? Are there other auxiliary services? Could it be cash managers; could it be tax records and financial services, like we do? There’s a whole bunch of different options that can put this together,” he continued.
Trust matters most Building a trusted, reliable team that can make informed decisions to advise your farm operation is often worth more than negligible differences in interest rate. That advice can save money in other parts of the business while also helping the farm move forward, both in the near term and the long term.
“I think it’s also really important as a business is in a management transition succession plan that the lender understands not only the previous generation, but the next generation that’s taking over and building those relationships with those future key decision makers and supporting them,” Murray shared.
In difficult financial situations, your lender needs to be able to gauge what is the best solution for your farm. Knowing how the business works and having an understanding of the cycles of the industry will help find that answer, Miller said.
Moving from bank to bank based on interest rates can expose you to the risk of surrounding yourself with a team that can’t be of the most help when you need it. A lender is not only about your loan but the other services they bring to the table, as well.
“Money is a commodity, but knowledge is not,” Miller said.