Small Banks Are an Important Resource For Farmers
If you’re seeing changes among your local farmers’ loan needs, you’re not alone. Whether they’re avoiding debt to keep their farms financially secure or making smaller investments in machinery and land, farmers are asking for smaller loans across the industry. Small banks that support farm loans can build sustainable growth by helping farmers navigate their banking decisions.
As you know, small banks are an important part of the financing landscape in rural areas. Here are a few guidelines for assisting farmers with credit decisions:
Understand that farmers are just as cautious about debt today as small banks are. Your bank depends on renting money to farmers for financial success, and you’re cautious about risk, but farmers are exercising that same caution. Farmers are spending less on machinery and fertilizer and applying the same conservative approach that many borrowers are using across both business and personal financing.
Approach your customers with the purpose of educating them, not selling your product. Informing local farmers with information about borrowing with a farm loan can help you build trust with your customers. Talk with them about researching multiple credit sources before making a decision and how to access critical data about each of those lenders. Become the source they turn to for critical information.
Encourage farmers not to be tempted by refinancing or extended terms. Talk with your customers about the perils of financial partnership with a lender that offers extended terms to too many people. The bank and the farmer are at risk of going down together if there are terms that aren’t financially viable.
Talk with them, too, about the common step of restructuring operating balances into longer terms, whether it’s a portion or all of their balances. They need to know that this often acts as a warning sign that financial stability is at risk.
Working alongside farmers to create a sustainable and reciprocal financial relationship is a central function of small banks, and you have the connections with your local farmers to extend valuable products that they need.
Membership in CBA of Kansas provides numerous benefits, one of which is the resources and information that helps you equip farmers for long-term financial success. For more details about all the additional reasons why CBA of Kansas is a valuable investment for your bank, give us a call.