Working with Tier 1 Lenders In Your Food or Beverage Business

A relationship with a Tier 1 lender is invaluable for a young and growing company.

Paul Dietmann of Badgerland Financial talks about the Farm Credit system, a farmer owned, farmer led system of cooperatives which primarily lend to farmers and any agriculture producers anywhere in all 50 U.S. states and Puerto Rico, including manufacturing companies if majority owned by farmers. Paul leads the Emerging Markets program at Badgerland, providing loans to non-traditional farmers (non-commodity farms like CSAs and value-added on-farm processors) as well as educational opportunities around financial literacy, financial statements and what it takes to successfully repay a loan.

As a more traditional lender, they tend to be very conservative. They have credit analysts that are meant to assess risk with any loan applications that come through to Badgerland. Paul is an advocate for the applicant and characterizes what Badgerland does is buying debt, essentially “renting” money to people who are credit worthy. Emerging markets are difficult to underwrite, and things like accounts receivable or unconventional equipment is difficult to assess how to fund that or how to assess the collateral. So, they often make loans for less than the purchase value of assets, and look to partner with investors and the entrepreneur

There is a need for a lot of technical assistance to make deals happen and get them documented/prepared. Often, only getting the entrepreneur, banks/farm credit and equity investors in the room is not enough to make these deals happen, and the lender is prevented legally from providing advice for the actions of the entrepreneur.