This 10,000 acre grain farm is located in the heart of the Regina Plains in some of the best crop land in Saskatchewan.  Referred to our office by MNP Ag Services, the issue was concern that the incumbent bank would not support the farm’s working capital needs for the upcoming crop season.  Account Manager churn was a concern as was banker expertise.

We evaluated the farm’s situation and quickly discovered a serious communication challenge between the farm’s bank and the producer.  The farm had excellent in-house financial reporting and was well capitalized, though had taken a few actions that would be viewed negatively by the bank. What was most alarming was that the bank had not issued a fresh loan agreement for 12 years.  That meant the bank had not spent time to really understand the business and its owners.  The bank was not truly engaged in the relationship.

Bank and customer relationships need to be nurtured.  I often characterize these relationships as being similar to marriage.  There are good times and there are bad times.  Relationships are easy in the good times but can be impossible at times of difficulty, particularly if there is an absence of understanding, caring, and effective communication.  Adversarial relationships built around power are unsustainable.

Initial negotiations with the incumbent bank quickly identified an absence of any desire to rebuild the relationship.  The irony of this was the strength of balance sheet, quality of farm, and presence of meaningful options (a balance sheet recapitalization was needed). The most important role we played in this engagement was understanding.  We helped bridge the communication gap by diffusing frustration and anger.  We provided clarity as to the bank’s needs and expectations, and why this is important in the bank/client relationship.

Ultimately an effective solution was developed that included both a new financial provider as well as a new crop input supplier (better input pricing was a further win).  Today this farm has proper credit facilities, a solid bank/client relationship, and an opportunity to grow the farming operation (which includes transition to third generation). 

As for the incumbent bank that lost the relationship – they are happy as well.  The bank could not visualize what a successful relationship would be and did not have the right staff to service the farm’s needs.  The incumbent is in a better place being removed from the relationship.  Incidentally, this farm was a client of the incumbent bank for thirty years.

When we work with producers we wear two hats.  Doug’s represent the interests of its customer.  We also understand and articulate the needs of the financial providers.  Our role is to bridge the gap in understanding, allowing a more cooperative and productive relationships between a farm and its financial partners.

Doug’s Strategy Workshop is your VP Finance and your banker, all in one!