Many Farmers Finding That Bankers Taking Hard Look at Loan Requests

Many farmers looking for a loan are finding their friendly banker isn’t so friendly anymore.

“Very good farm operators--well run--are having difficulty with financing,” said Jack L. Woolf, a grower on the San Joaquin Valley’s west side.

Tight farm credit is a byproduct of the financial crisis in which banks made bad loans to developing nations and savings institutions failed due to shaky junk bond deals, speakers said at an agriculture outlook seminar.

As a consequence, federal regulators are watching banks more closely and are demanding stricter financial accountability, said Robert H. Cooke, vice president of Sanwa Bank, California.

That is forcing bankers to return to basic ways of deciding whether a potential borrower has the ability to repay the loan, he said.

“Banks are much more thoughtful and much more rigorous in their approach to granting credit,” Cooke added. “They are stubbornly determined not to make problem loans. Banks can’t afford to make the mistakes of the past and still be around in the future.”

Woolf worried that “we’re in a period of overkill” in which federal regulators “are overregulating.”

But even a banker whose only role is to lend money to farmers said banks had to become more careful, both for their survival and that of the borrowers.

“Our mission is to provide credit to viable farmers and ranchers,” said Norman E. Payne, senior vice president of Western Farm Credit Bank in Sacramento. “The key word is viable.”

He said farmers with excellent credit “have more options than ever.”