“Relationships are easy when things are going smooth,” Arthur Moessner said. “It’s the twists in the road that let you know where you all stand.” That was one of the key takeaways during Moessner’s World Dairy Expo seminar in Madison, Wis. Moessner is vice president and dairy team lead for American AgCredit, and during his talk he compared lending to marriage.
He explained that selecting a lender is like dating, a time for determining if both parties can work together. Next may come a conversation with senior management, which is similar to meeting the parents.
A commitment to working together can be compared to a proposal, and loan closing day is like the wedding. He said that new partnerships will then go through a honeymoon stage, where everything seems to be going smoothly. When challenges arise, the real tests begin, just as they do in a marriage.
Moessner noted that dairy owner and banker relationships can be tested in many ways. Some examples are periods of low milk prices, unforeseen events (herd health issues, droughts, and so forth), large expansion projects, and when there are changes with bank staff or management.
What can you do to have a good relationship with your banker? Moessner pointed to the following elements:
- Good communication
- Timely financial reporting
- Prepare a plan to understand banking needs
- No surprises for your lender
- Manage and understand milk and feed price risk
- Understand your credit agreement
- Listen to your lender’s advice
- Know your numbers
- Take aggressive action when problems arise
- Invest in good accounting info
It takes time, but a solid relationship with your banker is necessary, in good times and bad. “It’s critical to have a good relationship with your banker!” Moessner emphasized.