Banker: Informal Groups A Good Way To Help Stretch Resources

Farmers and ranchers are inherently good at figuring out ways to save money.  A new trend that is growing in popularity is informally partnering with other farmers to save on expenses.  Ag banker Rachel Holland said it starts with a few producers looking for realistic ways to trim their outgoing money.  She notes while there are many benefits, there are some risks.

“Just because of potential issues with some of the producers financially.  You know, they may not all know their financial background, or what their financial condition is, and one may not be doing as well as the other, and they may have issues in regards to payment and things like that.  That’s why it’s so important to know your producers, know the group of people you’re dealing with.”

Holland added chemicals and fertilizers are the most common joint purchases she sees, with some sharing the cost of equipment.  She noted these informal groups change things for lenders as well.

“From a lending standpoint, we have to do extra due diligence, if the borrower comes to us, and asks for additional financing and maybe higher lines of credit to help them with paying up front or pay cash for the inputs, that we’re doing other due diligence that we’re verifying that they’re not having terms or are being carried with other suppliers.”

Holland said for these informal groups to be successful, one person cannot make all of the financial decisions, it must be a group effort.

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