Current Progressive Dairy digital edition

4 things to have when you meet with your lender for a year-end review

Contributed by Fred Hall Published on 20 November 2019

Even with milk prices trending up and 2020 looking to be even better, there is lots of uncertainty still in the marketplace. Continuing weather issues, trade and tariff issues, plus forage quality and availability all weigh heavy on producers’ minds as they struggle to finish the 2019 season.

With cow numbers moderating and storage levels slowing or declining, there is the expectation that milk prices will continue to improve. Current domestic consumption seems to be holding, but there are lots of signals out there pointing to a decline in global and U.S. economic health. A recession in this country would certainly put the damper on things. If negotiators could build a lasting deal for exports, the future would make a dramatic turn around.



Lenders and borrowers are now sitting down and reviewing portfolios with an annual review. Bankers will be asking more questions and looking for more information to evaluate loans.

Here are four things all borrowers should have ready when they walk into their lender’s office:

1. Bring the right information. Have your marketing and any expansion plans down on paper, and make sure they “fit” your business plan. I’ve talked about having a business plan before and can’t stress its importance enough.

On that same level is any capital investments or expansion plans: Have them researched and on paper. Include them in your proposed cash flow, and be sure to include related costs, like additional insurance, maintenance or labor. Know what is in your financials and understand how they depict your financial condition. These should include a balance sheet, cash flow statement and income statement.

The cash flow projection should include “what if” factors concerning price, cost and capital acquisitions. The income statement may be the tax form, but an accrual-adjusted income statement is preferred. If you are not using accrual accounting, start. It is the basis for many of the ratios and indexes bankers use.


2. Working capital is king. Be attentive to working capital, the difference between current assets and current liabilities of the business. Some ag economists refer to working capital as the first line of defense against financial stress, and ag lenders tend to watch this very closely. What is the status and trend of this component of your financial condition and, if declining, how can it be improved?

3. Personal finance information. Information on personal debt, especially credit cards, should be provided. It is also important to provide documentation to support your financial statement entries. Lenders are generally required to verify information such as account balances.

4 Build trust. These are essential components of any sound business relationship. The borrower deserves to know if the lender is concerned with the business while also providing assistance and advice toward the resolution of any issues. In turn, the lender needs to learn about financial difficulties directly from the borrower and on a timely basis.

The meeting should not be adversarial; you’re a team. The borrower and lender have similar goals: They want to ensure the long-term viability of the businesses, and a successful relationship requires cooperation and professionalism by both parties. Remember, a lender’s decisions are derived from the information you provide; accurate and complete financial information gives him or her the ability to fairly review your “ask.” A good relationship is built on a mutual understanding of the business and its financial condition.

The Iowa State University Extension and Outreach Dairy Team has compiled budgets available to use. These budgets were prepared as financial decision-making tools to current and beginning dairy farmers. Budgets represent many variations of conventional, organic and pasture operations.  end mark

This article first appeared in the ISU Extension newsletter.


Fred Hall
  • Fred Hall

  • Dairy Specialist
  • Northwest Iowa Extension
  • Email Fred Hall