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Finance |
During the days of easy credit, power shifted from the banker to the farmers.
If your own bank said no to an ‘out there' application, you only had to call up the bank with a different colour and they would invariably approve the loan. Farmers were signing up properties unconditionally and then telling their bankers to get it sorted.
Well – those days are over. The power has moved back to the banks and they sure are using it. We now need to consider the situation from the bankers' point of view. Having been a rural banker from 1970 to 1975, then involved in finance for the last 15 years, I can speak with some perspective here. Along the way I have also seen what not to do and how to really annoy your banker.
New regime
Under the new regime, banks require copies of your profit and loss accounts early. They need to see you are showing a profit, that you can handle your business and that your assets are much greater than your liabilities.
So, a few pointers:
- Communicate, communicate, communicate with your banker; call up your banker and have a coffee, tell him what is happening on your farm and in your business.
- Ask him if there are things that he can see that need improvement. Remember, he should know your business and have good ideas.
- They are not interested in excuses, they want results.
- Get your Profit and Loss Balance sheets out as soon as possible and get a copy sent direct to your bank manager.
Professional meeting
Call a ‘professional meeting' of your solicitor, accountant, trustees, partners and bankers. Put up an agenda and work through the governance issues. For example:
- Employment contracts
- Trusts
- Lease documentation
- Projected budget
- Analysis of previous results
- Debt reduction
- Succession
Never, never call up your banker when you are having a bad day and ‘chew' his or her ear. Get and keep control of personal drawings. Talk about profit, not asset acquisition and capital gain.
In summary; we all need to build a better relationship with our banker. Remember ‘he who has the money, calls the shots'. Make some time and effort to achieve this and the rewards are yours. Also realise, he or she will influence your interest rate.
These are the opinions of Don Fraser of Fraser Farm Finance. Any decisions made should not be based on this article alone and appropriate professional assistance should be sought.