Trust. It’s the glue that holds together the relationship between the bank and the borrower. And just like any other relationship, trust can take years to build through communication, setting expectations and following through. But when those things don’t happen, the relationship can be at risk.

Paul pauly
Complete Management Consulting

In fact, that was the case on a 1,500-cow dairy I was called out to five years ago.

The lender had just informed the dairy farmer that after not making money for three consecutive years, his bank note would not be up for renewal. He thought he could just “ride out” the bad years doing the same things he had always done. But the bank no longer wanted that risk.

So what is a dairy farmer to do?

He thought all hope was lost, but bringing dairy farms back from the brink of bankruptcy is my specialty. We laid out a plan to make changes on the farm management side, and rebuilding the trust with the lender was our top priority.


Our first order of business was to help the dairy farmer actually understand the reality of his position. As the dairy had grown and expanded, they had not kept up with a bookkeeping system that allowed them to really know where they were at. They just wrote out the checks as the bills came in, if they had the money in the checkbook to do it. The lack of a tracking system meant that sometimes the same bill was paid twice. And at the end of the day, they really had no clue as to whether or not they were making money.

As we sorted through the finances, we assembled a four-part package that showed a clear picture of where the dairy was at financially, where they could be with some management changes and how we would ensure those changes were made to get this dairy making money again.

The four-part financial package

This set of statements and reports was the currency we used to rebuild trust with the dairy’s lender.

Here’s what we put together on paper:

  1. A cash flow statement of where he was currently at
  2. A current budget for where he would be if he continued to do everything the way he was doing it
  3. A projected budget with our plans in place of how he's going to look financially if he made all the management changes our team suggested
  4. A progress report to update the lender as the action plan was enacted

With these documents in hand, we were able to go back to the lender and start the process of rebuilding enough trust to keep this dairy farm on his books. In the beginning, we provided the lender with a progress report on a weekly basis, and then we extended it out every couple of weeks as the dairy got headed in the right direction.

Putting a complete package together, being able to go out on the management side, looking at what's going on day-to-day and being able to go back and put these numbers on paper created the process and follow-up that lender needed.

This combination of a plan for management and financial changes on paper and with accountability and an action plan helps both the producer and the lender be confident to move forward.

And that’s why today, five years later, that dairy farmer is now profitable, showing positive years and still with the same lender. Trust is there, the loans are renewed, and the lender and the dairy farmer both are confident about the future.