Last week we focused on a panel discussion concerning a bank that recently turned its back on agriculture and small business. While last time discussion centered on industry risk and concentration as the elimination factors, let’s explore another nightmare.
Exhibit B: The Disempowered Loan Officer and Loan Manager
Another panelist discussed the same bank in a negative light. This panelist’s business is a fourth-generation small business that has made their payments on time. Recently their long-time loan officers became more like tellers and clerks; that is, senior management eliminated all lending authority, which prohibited them from making loan decisions. Yes, they could come out and gather information, but the decision was made by a person who only examines the numbers.
This particular case found that their term debt coverage ratio was 10 basis points, or one tenth of one percent, in violation of covenants, and the loan was called. The loan officers and managers in this case became so discouraged that they quit working for the institution, leaving this business to deal with people who were not familiar with their account. And, again, the “lender in waiting” gladly approved this credit after years of courting, with a smile on his face.
The Bottom Line: Do you deal with a lender or lending team that can make a decision?
Next week, I’ll discuss another story from this panel.
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 email@example.com.