What Bankers Want You To Know

Policy & Business

Pointers for running your farm like a business

By Chuck Marshall, manager, K·Coe Isom banking advisory

I recently spent some time talking with bankers in different parts of the country, asking what they would like agricultural producers to know about the lending business.

Having been a banker for 20 years before I joined KCOE in 1998, I have my own ideas about best practices for agricultural borrowing and lending. But hearing from bankers who are on today’s lending frontlines confirmed my own observations.  

The bottom line is that lenders want you to run your farm like a business. That means knowing your numbers. Most farmers are good at farming, but too many fall short of running the farm like a business. Bankers understand that you’ve got a lot on your plate, from the weather to pest control to regulations. But regular, accurate financial information will make a big difference with your lender and, more importantly, keep your operation on sound footing.

banker farm lending ag

Here are a few best practices that lenders want ag producers to follow:

Don’t wait until the end of the year to prepare your financial statements.

Preparing regular financial statements — income statements, balance sheets, statements of retained earnings and cash flows — is standard practice for all businesses, and it should be for your farm too.  At least every quarter, and preferably every month, prepare a financial statement that’s as detailed as it can be. It should reflect all changes in your financial position.

When you’re focused on producing one or two crops, it’s easy to put this off until the harvest is over. Don’t wait. Knowing your farm’s financial position gives you a better sense of where your business is and will help you run your ag operation accordingly. For example, should you purchase that land or equipment or wait? Should you lease it? The most current financial information will help you understand whether to incur or defer expenses or make other moves.

Proactively market your production.

If you aren’t using futures contracts or hedging, or working with an expert to market your crop, you’re putting your business at risk. You can’t just hope the market will offer profitable prices when it comes time to sell. Ag prices are too volatile to leave all those chips on the table. Develop a good risk management strategy and discuss it with your banker. If you are both on the same page on what is at risk, you will find conversations during adverse markets will go a lot easier.

Know the realities of your financial condition before your banker tells you.

If you’re on top of your numbers, you’re better prepared to target opportunity and make good business decisions. You’ll know your value before you start the transaction. Providing accurate, current and consistent information expedites the lending process. Bankers like working with someone who consistently makes money and knows his or her business. 

Also know your projected cash flow and have some sense of where you are going to be at the end of the year. No one like surprises. If you have a budget and know your break-evens, you and your banker will feel more comfortable knowing the road map.

Don’t be in denial about the value of assets on your balance sheet.

Correctly assessing the value of your machinery or equipment in your balance sheet helps you understand the value of your business. Use current market values based on what has recently been selling in your area or take last year’s numbers and reduce those by 5-10 percent. Not using credible numbers indicates you’re out of touch, emotionally attached to your equipment or just not willing to give this important financial detail the attention it deserves.

The bottom line is that preparing your farm’s financials often and accurately is a sobering but valuable exercise. Staying updated on your financial fundamentals reveals what you owe and to whom. These all-important numbers tell you your net worth and help you measure your performance. They’re essential to estate or succession planning. Your banker will be pleased, but more importantly, your business depends on it.


From the Ag Financial Experts at K·Coe Isom  <https://info.farmersbusinessnetwork.com/kcoe-fbn-direct-marketplace>

Chuck Marshall was as a banker for 20 years before joining K·Coe Isom in 1998. He is a Certified Regulatory Compliance Manager through the American Bankers Association. Contact him at chuck.marshall@kcoe.com.

For more info on how K·Coe Isom’s AgKnowledge capabilities can help your farm, visit:


The views expressed in this article are the author's alone and not those of Farmer's Business Network, Inc., its affiliates or members.


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