Is Communication Important with a Lender?

By: Justin Craig, Lebanon Ag Credit Principal Loan Officer

YES! You’ve likely heard of the "Five Cs of Credit" which are: Character, Capacity, Capital, Collateral and Conditions.

These are metrics used by a lender to help make a loan decision. Another "C" that is extremely important is Communication. Unfortunately, problems can arise with farming and finances. The farm economy can be a tough arena to be in, especially with volatile weather and markets. If you begin to have cash-flow issues or see a shortfall with farm commodities you raise such as cattle, corn, soybeans, wheat, tobacco, or dairy that are tied to loan payments, the earlier you talk to your lender, the better it is. Early discussion is important in that hopefully a plan can be arrived at before the situation escalates beyond repair.

Chances are that you will need to work with your lender after a loan is closed, so maintaining a good relationship and line of communication is key. If problems arise that can affect your ability to pay loans, scheduling a meeting with your lender can be very beneficial. This will give an opportunity to discuss details of what is going on and what can possibly be done to remedy the situation. Be open and honest with yourself, your spouse, and your lender in collaborating. Don’t refrain from relaying certain information, as this may help everyone gain a better understanding with developing a plan

A lending mentor once told me that with a lending relationship, you need to keep your spouse (if married) and lender well-informed. It took me time/experience to realize the importance of him saying this, but it holds true and remains a strong point to this day.

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