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If you have borrowed money, you have most likely heard your lender discuss the Five C’s of Credit. Recently, many lenders have indicated that character of the borrower is the most important of the Five C’s, particularly in tough economic times.
One lesson learned from this economic crisis is that many lenders got away from the principle of knowing their customers. A few years ago, a quick credit score with a few bits of information got you a ticket for up to a half a million dollars in some cases. Now, some of those loans are a complete failure both inside and outside of the agricultural industry.
What is good character? It is doing what you say you are going to do. This goes for both borrowers and lenders. Good character is exhibited through open and honest communication with suppliers, lenders, customers, neighbors, partners and family members, as well as employees.
Good character is developing and following a solid business and financial plan, and being lean and mean in tough economic times. It is making the necessary sacrifices to pay bills and expenses on time. It is a “no excuse” attitude of accountability, trust and ethics. Character is often the forgotten “C” during good economic times, only appearing to exhibit its true colors in the face of adversity.
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.
