Agricultural lenders play a key role in farm operations. According to the USDA ERS, about 60% of midsize farms and 75% of large farms carry debt, highlighting the importance of the farmer-lender relationship. But how do farmers portray these relationships? We conducted 74 in-depth interviews with 98 farmers and ranchers in four states (Alabama, Kansas, Montana, and North Carolina). Interview participants included midsize and large-scale operations producing a diverse range of crop and livestock products. Participants’ description of their lender relationships tended to fall into three types: trusting and collaborative, strained and tense, and transactional and unstable. Here’s what they told us.
Trusting and Collaborative Relationships
Farmers described a wide range of positive relationships and experiences with their lenders, often emphasizing trust. Many characterized their relationships as “good,” “very good,” or even “great.” In most cases, lenders were described as partners, advisors, and collaborators invested in the farm or ranch operation’s well-being. Farmers emphasized the importance of transparent, open communication, as one farmer explained, “I want them to tell me if I’m being dumb [in] a decision I’m making.” Long-term relationships were common. One producer described his long-term relationship, “I’ve had the same one since I got a checkbook when I was in high school.” Others noted the importance of responsiveness, one farmer noting he could “pick up the phone and call ’em even if it’s after hours at night.” Many reported that they were willing to pay a slightly higher interest rate for a lender with an understanding of agriculture.
Strained and Tense Relationships
Some farmers shared examples of lender interactions that made them feel especially tense or stressed, often related to the bank’s financials being prioritized over understanding the realities of farming. As one farmer explained, “I just know that they’re a salesman. They’re just trying to sell me money,” and another added, “They’re out for themselves.” These situations often created a fear of denial or being judged, especially during financially difficult years. And as one pointed out, sometimes the lending institutions were also part of the stress, not a solution to it, stating, “They came calling for money earlier than I expected.” These negative relationships clearly added management constraints, uncertainty, and increased stress.
Transactional and Unstable Relationships
Other farmers described relationships that were neither positive nor negative. One farmer stated, “At the end of the day, it’s business strategy – not a relationship.” This group of producers was less concerned with relationships than with interest rates and tended to have minimal interactions with their banks as a strategy. However, drawbacks to this type of non-relationship were often acknowledged. A producer explained, “We switched 10 years ago for better interest rates, and I’ve had three different lenders in those 10 years.” Following the best interest rate led to having to constantly build a working relationship with a new lender. A second group cited lender turnover as the reason for having transactional or transitional relationships with their lender. Frequent personnel changes can leave ranchers and farmers constantly working to build trust with a newly hired lender. One farmer explained, “The problem I’ve had lately is a lot of loan officers are retiring, and it’s kind of making everything chaotic.” Even with capable new lenders, farmers expressed a cautious attitude with short relationships and little understanding of their specific agricultural operation. Regardless of the cause, the lack of long-term familiarity created uncertainty when making farm management decisions.
The Bigger Picture
The experiences of farmers and ranchers we interviewed reveal the importance of the lender relationship in farm management decisions. We learned that trust, communication, and a thorough understanding of agriculture in farmer-rancher/lender relationships are just as important as (if not more than) access to capital for farmers and ranchers. Strong, collaborative relationships can and do reduce uncertainty and help agricultural producers navigate the challenges of short and long-term planning. One farmer summed up her relationship with her lender by stating, “They have treated us unlike any other banking entity. They treated us like people and not numbers.” Other relationships that lack understanding or personal connection can create additional stress, uncertainty, and cautious decision-making. Recognizing these relationship dynamics helps highlight what farmers value most in their lenders.
Authors: Gracen Briges, Kelli Russell, and Mykel Taylor, Southern Ag Today
