Recently I conducted a young and beginning farmer seminar for the Virginia Farm Credit Associations and for Carolina Farm Credit.
We asked both groups the top three reasons they would switch agri-lenders. Almost half of the group responded by indicating non-competitive rates would be a major reason to change. Approximately a third of both groups indicated they would switch for less than 1% or 100 basis points. Surprisingly, more than a fourth of the participants felt that it would take up to 2% rate difference for them to switch.
Other reasons that would make them switch lenders would be foreign processing of loans and financial services, ‘cookie cutter’ loans with little flexibility, loss of loan officer and change in lender philosophy toward ag loans or a segment of the agricultural industry.
Surprisingly up to a third of both groups had not been visited in the past year by other ag lender competitors, approximately 40% were visited one or two times, while about a quarter of the group had been visited three times or more in the last year.
How important is patronage dividend? Approximately 40% indicated it was of high importance, 50% average, and 10% felt it was of little importance.
As interest rates start to rise, it will be interesting to see how the importance of rate increases will impact customer loyalty.
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Editors' note: Dave Kohl, The Corn and 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.
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