Whether you’re a cow-calf producer, run a backgrounding outfit or grow beans and corn along with your purebred cattle operation, you most likely can describe your agribusiness without hesitation to your local banker.
When it comes to more complex information – things like production costs, risk management, a marketing plan, etc. – however, it’s often not as easy to put things in terms your banker understands. The best bet, then, might be to start with the basics – your balance sheet and tax returns.
The balance sheet describes your assets and their value, and also compares that value to your liabilities – what you owe to others in order to arrive at net worth. Choosing a standard time each year to fill out a new balance sheet is a good management plan. That way, you’ll begin to see and measure your progress in building net worth, either by adding assets or decreasing liabilities. If you proactively bring an updated balance sheet to your banker every year, you’ll make a statement about your level of professionalism and dedication not just to the management of your agribusiness, but the relationship you strive to have with your banker.
It’s also a good idea to be proactive when it comes to tax returns. If you’re meeting a banker for the first time, bring two or three years of your most recent returns to review. If you have an established banking relationship, simply provide your most recent return so your banker has it when he or she needs it. The tax returns, especially when combined with the balance sheet, help your banker determine your ability to generate the cash you’ll need to repay loans.
Another helpful practice is to fully develop and write down the goals you have for your agribusiness. Most proactive farmers and ranchers these days have these kinds of written goals, and are more than willing to share them with their bankers and/or other financial advisors.
We all know farming involves risk due to things like weather, international market volatility, domestic demand, currency values, disease, etc. So, what are you doing to minimize your risks? Your banker needs to know that, too.
Finally, be sure to present your banker with a marketing plan. Maybe it includes the weight and age you plan to sell your cattle. Maybe it addresses how you make cow culling decisions. Whatever it is, be prepared to share your strategy for marketing your cattle and/or crops. Again, putting it on paper not only will help your banker, but it will help you with decision-making and sales timing.
Armed with all of this information and awareness, any meeting with your banker will be more productive for both of you.
