10 Signs Your Bank Is Working for Themselves
- Grant Wiese
- Jul 13
- 5 min read
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10 Signs Your Bank Is Working for Themselves
There are a lot of good banks and ag lenders out there. We need them. We rely on them.
But here's the reality: there are good banks with bad lenders. There are bad banks with good lenders. And unfortunately, there are operations out there dealing with both a bad bank and a bad lender at the same time and they don't even know it.
The farmers who know their own numbers are the ones who can spot these red flags. The ones who've handed their financial picture entirely to the bank are the ones who find out too late.
Here are 10 things to watch for:
1. They don't give you a copy of your balance sheet.
This one still outrages me.
If your bank won't give you a copy of your own balance sheet, you have no historical documentation to take anywhere else. No other lender can approve your credit without it. And if your current bank ever shuts you off or raises your rates, which they absolutely can, you've forfeited the leverage to shop around.
Your balance sheet belongs to you. If the bank is treating it like theirs, that's a problem.
2. Your operating note has a hard maturity date and must be paid to zero before renewal.
Some banks still operate this way and I'm still amazed every time I see it.
If your operating note was made February 1st, it must be paid to zero by January 31st every year, no exceptions. That forces you to sell grain before you want to and eliminates your ability to prepay expenses at a discount or for tax purposes until after the new note is made.
That lack of flexibility costs you real money. Every year.
3. They routinely term out operating losses.
This one is closely related to number 2 and it's worse.
If you can't get your operating note to zero by the maturity date, the bank terms out whatever's left on a 5-year note. Problem solved, right?
Wrong. This is one of the worst things a bank can do to a farmer, and it should almost never be recommended. It doesn't address the root cash flow problem. It makes your cash flow worse going forward with additional debt to service. And it costs you more in interest, paid to the bank, while the underlying issue gets buried under a new payment structure.
If your bank does this routinely, they are managing their risk, not yours.
4. All your collateral, including real estate, is tied up on your operating note.
If you are in a strong financial position, your farm ground should rarely need to be pledged as collateral for an operating note.
When a bank ties up every asset you own to secure the operating loan, a few things happen:
They no longer feel the same responsibility to lend carefully, because they know they'll be made whole no matter how big a hole you dig.
And you lose the ability to shop your credit elsewhere, because any competing lender can see that your assets are already fully encumbered.
You want the bank holding as few of your assets as necessary. Not a lien on every inch of ground you own.
5. 5-year balloon payments on real estate notes.
Some banks have legitimate limits on what they can offer on a real estate note, so this one isn't always a red flag by itself.
But if you're given a choice and the bank is pushing you toward a balloon structure where you must reapply and get reapproved to keep your own land note, pay attention. That reapplication happens on their timeline, at their terms, and potentially at your weakest financial moment. A longer-term note protects you from having to negotiate from a position of weakness.
6. The bank is "pruning accounts" and you're on the list.
I've had multiple farmers share this experience with me. The bank tells them it's nothing personal, just a directive from upstairs to trim the portfolio.
Here's the hard truth: if the bank is asking you to find a new lender, one of two things is happening:
Either you are in a more compromised financial position than you realize.
Or the bank is in trouble and cutting risk anywhere they can.
Neither one is nothing personal. Both require your immediate attention.
7. You get no coaching or feedback on your financial position.
This might be the most common red flag on this list and the most dangerous, because it doesn't feel like a problem until it's too late.
If your lender never walks you through your numbers, you have no idea how they actually view your operation. You find out you were in a stressed position the day they say: "We won't be renewing your operating note. You'll need to find a new lender."
That's how farmers end up with 18% interest rate operating loans from high risk lenders. Not because things fell apart overnight, but because nobody told them things were falling apart at all.
8. They're lending on name and reputation, not on ability.
They write notes to the family name. They don't go over your financials. They've done business with your dad and your grandfather and they'll do business with you.
Right up until they won't.
Lending on reputation without reviewing financials will take you to bankruptcy. There will be nothing left for you to retire on or pass to the next generation. And the bank will still be made whole.
9. Loan decisions are made from your balance sheet alone, never from a cash flow projection.
A lender who only looks at your balance sheet is a collateral lender. They're not evaluating whether your operation makes money. They're evaluating whether they can get paid back when things go south.
Your cash flow projection is what shows whether your operation is profitable and sustainable. If your bank never asks for one or never really reviews it, they've already told you how they view the relationship.
10. The bank isn't genuinely ag friendly.
Fewer banks have lenders or leadership who actually understand agriculture. When they can't explain an ag loan to their board of directors or credit committee, they get uncomfortable putting those loans on their books.
Some institutions that were created specifically for ag finance no longer see a future in lending to the ag industry. If your lender can't speak your language, crop cycles, input costs, land values, commodity markets, that gap will cost you eventually.
As a farmer it's hard to know sometimes whether these red flags are showing up because you're in a compromised financial position or because the bank simply doesn't have its act together.
Here's your hint: If your lender isn't coaching you on your financials, isn't sharing ideas to improve your position, and isn't handing you a copy of your own balance sheet, it's time to look elsewhere.
And while you're looking: build your own balance sheet. One you own. One you understand. One that doesn't live only in someone else's filing cabinet.
That's the starting point for everything.
If you want to build your own balance sheet, I suggest you go here: www.farmbalancesheet.com
Have a great week!
Grant
