Lender Nightmare

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The other day I moderated a panel of small business owners and agricultural producers in the eastern Corn Belt.  The purpose of the discussion was to ascertain what customers seek from their lenders.  The panel of six soon focused on a major lender in the area that had become the Freddy Krueger from A Nightmare on Elm Street lender.

 

Exhibit A: Case In Point

One small-business person had over a 50-year relationship with this bank through many mergers and acquisitions.  The bank pushed his business out the door despite not having missed a payment in 50 years.  Now, you are probably asking, “Why?”  This business happens to represent an industry that is in an economic cycle downturn.  The bank was instructed to reduce the portfolio concentration in this industry, and they represented the largest player in the industry. The bottom line was that this panelist, who represented a successful third-generation business, was able to quickly seek financing from another lender who had been courting them for years. 

Folks, more of these situations will occur, particularly if agriculture goes into a downturn.  These economic sniffles create panic among regulators and senior management teams that are distant from the business community.  There is a tendency sometimes to “throw the baby out with the bathwater” in tough times.  My response in my lender schools is that there are always successful businesses, even in a down economic cycle for that business’ industry.

Quote:“Look for a lender that does not paint the whole industry with the same brush!”

I will address more insights from this panel next week.

 

Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.

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