Don’t be timid when it comes to asking customers to fill out credit applications, advises George Twohig, a Chilton, WI, attorney specializing in agricultural law.
Twohig, who heads up the firm of Twohig, Rietbrock, Schneider & Halbach, says custom operators and hay growers often shy away from asking customers for financial information even when they are concerned about the customer’s ability to pay. “That’s especially true if the customer happens to be a friend or neighbor,” he says.
But that misses the point of what a credit application is all about. “The goal is to get a more complete picture of the potential customer’s overall financial condition so you can assess his ability to pay you for the products and/or services you’re providing,” he says.
“Once you’ve sold the hay to someone or completed custom work for them, you become dependent on their business success. Full negotiations and clear understandings are essential to reduce the possibility that you’ll become part of a customer’s cash flow and other financial problems.”
Twohig’s bottom line: “Farmers routinely fill out credit applications when dealing with other businesses – equipment dealers, co-ops, feed suppliers, lenders, etc. Why should it be any different when they're dealing with a hay grower or custom operator? Really, payment for custom services and feed should be committed as part of the farmer’s operating loans or line of credit.”