A second available line of credit is good risk management
One of the producers I respect most is a Wyoming farmer and rancher who said, "One thing I learned from my father is to always have another line of credit available if you need it." He, like his father, has a $5 million line approved by a second lender that he has never had to use. But it's a great security blanket. I think that's good risk management.
Even if you don't get another line of credit approved, it's very important that you know other lenders and have a comfort level about who they are and how they operate.
Competing lenders are very willing to get to know you because someday they may get your business. It's good business for you and your lender to develop a relationship.
Credit relationships can go sour even when credit worthiness is not an issue. With the mergers and restructuring in the banking and lending business, things can change quickly through no fault of your own.
Credit has never been more available. Loans now are offered by a variety of sources that traditionally were not big players in ag lending. They have the people, products and processes to be big players. This can be of benefit to you if you take advantage of the changes. That doesn't mean you should jump ship from a long-time relationship. But it's a good idea to know your options.
The Internet can help you locate new credit sources. Last October I attended the fifth-annual Ag Lending Technology Conference in Council Bluffs, IA. Using the Internet in business was the theme of the conference.
One interesting company featured was OnlinEquity.com. It's an electronic platform for loans, deposits and wealth management products. It's designed for farmers who want the convenience of online financial services coupled with the personal touch provided by a local lender.
Participating lenders provide OnlinEquity.com with key product and contact information, including a risk rating for accepting leads and the zip codes in which they want to receive those leads. When a consumer seeks financing through a participating Web site, the lender is notified via e-mail. The lender then contacts the potential customer and tries to close a loan or other financial business that otherwise would have been unavailable to that lender.
As Marti Rodamaker, president of First Citizens National Bank, Mason City, IA, and current president of the Iowa Independent Bankers Association, explains, "A competitive advantage of being a locally owned institution is that customers know us by name. Technology like this provides us with one more tool to build on our strengths."
This points out that things are changing and you can be the beneficiary. Good risk management is making this rapidly changing environment work to your advantage.