Given the difficult state of the dairy industry, lenders might, in some situations, be taking longer to make their credit decisions. Is this truly a tough year? YES!!! Is it the end of the world? Hardly. Is your loan renewal taking longer than usual this year? Perhaps, but so are the renewals of many other producers. Do you feel like your lender is being tough on you? Welcome to the new world of dairy finance. I have seen some of the most extreme lender responses over this year, some that even supersede decisions made in the 20-month downturn of 2002 to 2003 or even 2009. Perhaps, these same lenders haven’t forgotten the implications of these past downturns. However, I have observed two distinct and sometimes extreme reactions from lenders during the past year. The best lenders have laid out specific guidelines for my clients and provided them with sufficient operating capital to keep their dairies running smoothly during this transition time. This has allowed them to continue daily operations without worrying about whether their lines of credit will be renewed and has also allowed them to maintain positive relationships with their vendors. This ability to maintain operations in an ongoing and positive manner can be crucial to the success of any business. On the other extreme, I have seen some lenders drag out the renewal process for so long that they have actually weakened the client even further. Then, when the bank finally did complete the renewal process, the restrictions and reporting requirements were so onerous that the clients barely had enough money or time available to run their business! Additionally, these same lenders acted as if they were doing their clients a favor by completing the renewal. Allowing for a herd loan with a 65% today loan-to-value (LTV) is not exactly my idea of “thinking outside the box.” Limiting this client to a level of 62% LTV on their herd loan, particularly in a year like this, was a clear demonstration that this lender was not a long-term player in the industry. In spite of this, we still need to move forward in a positive manner. As a dairy producer, what should you do now? How can you position yourself to survive this extended downturn in milk prices?
- Be certain that all of your loan covenants and reporting requirements are up to date.
- Maximize your overall results as much as possible. If you are not sure how to accomplish this task, call on someone who does. This is an excellent time to visit with your certified public accountant, financial adviser or another lender. Try asking the potential new bank(s) what they might be able to do for you in your current situation.
- Don’t lose your “vision” for the future. Define clearly what you want going forward and then maintain your focus in the future. Review your goals and set new ones regularly.
- Learn from life’s lessons (failures) and move forward without dwelling on them. Instead, make a list of what items you should consider changing and then discuss them with others to be certain that it makes sense. Frank McKinney, in his book, Make It Big! tells readers to, “Do your job, do it well and do it every day.” This is sound advice for each and every one of us, especially in tough financial times.
- Finally, be sure to enjoy the process. One of the best ways to accomplish this step is to adjust our attitude by following the advice of George Bernard Shaw, who said, “The people who get on in this world are the people who get up and look for the circumstances they want, and, if they can’t find them, make them.”
Please join me in following his advice. You’ll be glad you did!