By TIM ALEXANDER

Illinois Correspondent

URBANA, Ill. — A University of Illinois Extension commercial agriculture educator has issued advice for farmers who are considering entering into a commercial loan agreement in times of economic uncertainty. The Extension educator also issued guidance for choosing the proper farm financial records software.

“The current political news brings concerning thoughts about the economic future of farming as we are faced with higher interest rates, lower grain prices, and import markets at risk due to trade wars and tariffs,” said Kevin Brooks, University of Illinois Extension Farm Business Management and Marketing Educator. “As individuals, there isn’t anything farmers can do to prevent difficult times. However, you can make your situation more secure by having a good relationship with your ag lender. Having multiple lender options and relationships may be helpful. Building an ample supply of cash reserves is another way of preparing for possible financially stressed times.”

At or near the top of Brooks’ recommendations for farmers is to make sure you are in agreement with your spouse or other family partners and have them be present and a part of your presentation at your loan meeting. He also suggests calling your lender before problems become big problems. Other suggestions include:

Be friendly, professional, and concise in communications with your lender.

Understand your balance sheet and keep it updated.  Know how to build one yourself.

Work up your cash flow to present to your lender rather than relying on your lender.  Be aware if any financed projects make sense.

Ask your lender what is needed before meeting with them.

Discuss any liens on collateral with your lender including lease contracts with Illinois Landowner Lien provisions.

Use your computer for record keeping and keep accurate financial and production records.

Use your computer to create a business plan narrative roadmap of how you got to where you are, where you are going, and how you plan to get there.

Provide your lender with a contact list of key suppliers and advisors.

Do not attempt to influence your lender with money or gifts. There are strict rules for lenders, and this would be unethical.

If you aren’t carrying full crop insurance, be prepared to explain why. Your lender expects payment.

Dress professionally for your important meetings.

Carefully read all documents before signing and make clear to your lender that you understand what you just signed.

Never avoid or put off replying to requests from your lender.

Your lender will likely need to present your loan proposal to a loan review board. Your lender doesn’t like surprises in front of the board so avoid surprising your lender.

Brooks noted that though concerns about the future of farmers are being voiced, few are predicting a 1980s collapse, when interest rates skyrocketed as a response to back-to-back deep recessions caused by high inflation, causing farm mortgage loan rates to rise to 17.5 percent. 

“Many farm mortgage loans had adjustable interest rates, which adjusted upwards and led to great difficulty in making loan payments.  Foreclosures on farms became commonplace. If that wasn’t enough, just before the beginning of the farm crisis, the Carter Administration placed a grain export embargo on the Soviet Union, which had become a strong and growing market for US grain exports.  Relationships between farmers and agriculture loan officers became stressed,” Brooks recalled. However, “History doesn’t necessarily repeat as evidenced by predictions of ‘bad times for farming are coming’ in the late 2010s, which were unexpectedly met by record farm profits.”

Brooks also issued tips on improving farm operational efficiency through the use of comprehensive financial records software. Selecting the right computer software for your operational record keeping is vital to efficiency, according to Brooks. 

“Just like preferences in driving a car or using a mobile phone, everyone has their personal preferences in how the records program operates.  There is no program that meets the needs of all farm operations. With dozens of good products to choose from, there are key features to think through in selecting the farm records software,” he said.

“Good support is very important, and more so if the farmer’s skills in bookkeeping and interpretation of accounting information is not strong,” according to Brooks. “Don’t expect help with farm issues from general software. Some companies offer live support and others offer only guides. The less expensive the product is, the less live support will be available. Oklahoma State Extension has a good amount of material available if using Quicken online.”

Brooks offered his suggestions for negotiating with a farm lender and choosing a farm financial software system in a pair of articles published by the University of Illinois Extension. Contact/Source: Kevin Brooks, University of Illinois Extension Farm Business Management and Marketing Educator, kwbrooks@illinois.edu.