Knowledge Centre

Whether they milk 20 or over 1,000 cows, Canadian dairy farmers are facing weighty issues, such as managing tight cash flows amid rising input costs, reaching their growth objectives through prudent expansion, and wading through complex succession matters for their multi-generational, family farm.

Adding to these concerns, these producers can sometimes be unsure how to begin a successful dialogue with their banker, to discuss these challenges and ‘get approved’ for the financing they need. Fortunately, Scotiabank’s Agricultural Banking team describes how this communication disconnect can be resolved, if farmers and their bankers talk early, often and openly.

Up at night, thinking costs, growth, and the next generation:

“In the last year, we’ve definitely seen dairy producers grappling with rising costs that can impact their cash flow,” observes Jeroen Slits, a Client Relationship Manager, from Ontario’s Perth County, where he serves a wide range of dairy clients. “Adding to that, they face ever-rising costs of land per acre if they want to expand their farm base for the next generation.”

On the west coast, Dariann Kloot, a Senior Client Relationship Manager in Chilliwack, BC agrees. “The main things right now are rising production costs and a very challenging labour market to find and retain the best employees with real ‘cow sense.’”

Kloot, who grew up on a family dairy and poultry operation, can also describe what differentiates the most successful producers. “Those with a clear vision of both their short- and long-term goals are in the best position. That means considering both longer range changes to the world and economy, plus near-term issues, like managing rising expenses, perhaps by hedging commodities to reduce feed costs or investing in irrigation systems to increase their grass yield. To do so, these producers dedicate time to budgeting and financial planning.”

While these producers have clear plans in mind, they don’t always feel prepared to discuss those goals with their banker, notes Tim Shuh, Client Relationship Manager, who runs a diversified family farm near Elmira, Ontario.  “While producers are sophisticated business operators, it’s not uncommon for a less experienced owner - or someone who hasn’t approached a lender before - to expect a speedy credit approval if they simply hand their banker a stack of financial statements that include ‘everything but the kitchen sink’.”


“The reality is that, instead of a ream of paperwork, your banker is usually looking for specific information to assess your capacity to take on new debt. With this information, we can have a good conversation to understand your financial, operational or succession planning goals.”

Tim Shuh, Client Relationship Manager, Agricultural Banking

Come with the right numbers:

Scotiabank’s Agricultural Banking Specialists explain that most often, a banker wants the following information to identify a credit solution that matches their client’s goals and circumstances:

  • Strength of management: Be prepared to show your ability to run the business successfully by discussing your tenure, background in dairy, including your hands-on experience and achievements, training or education, and involvement in the agricultural community.
  • Strength of cash flow: Provide data to show your operation’s cash flow history and ability to handle potential debt payments. Generally, a banker wants to see a three-year history of financial statements including key figures such as a debt service calculation and a debt-to-equity calculation.

Note:  Debt service coverage ratio is calculated by dividing EBITDA (net income before interest, tax, depreciation, amortization) by interest payments and yearly principal payments.

  • Your collateral: Provide recent documents that assess the value of all assets that will serve as your collateral, including land, buildings, major equipment and other assets. 
Keep in mind that different financial institutions have varying criteria that guide their lending decisions, so ask your banker, before your meeting, what specific information they would like to see. And, don’t be intimidated by these numbers. Since not everyone is comfortable with financial documents, ask your accountant to sit down with you when they prepare your financial statements to explain the highlights, so you’ll be familiar with the numbers when you meet your banker.
Come with a plan: Since lenders like to have a good understanding of why the applicant wants a loan, come with a clear plan that explains the purpose of the loan and how it will aid your operation and profitability. Be ready to provide projections of the impact of the loan and any assumptions you are making. For example, “This robotic milking equipment will enable us to be more efficient by potentially reducing the need for full-time labour. Assuming prices remain steady at $Y per litre, we will net $Z thousand per month in added income."

Don’t worry if you are not an expert in preparing business projections, since a good agricultural banker with experience in the dairy sector will gladly help you develop these calculations. It’s also a valuable way to strengthen your relationship with this individual and earn their ‘buy-in’ to your plan.

Talk early, often and openly: Although dairy producers may face unexpected financial needs, it’s a good idea to talk regularly with your banker about your business, including your current and future requirements. 


"As your Agricultural Banker, we want to be part of your team and be at the table for those conversations. Whether it’s reviewing cash flow projections or the feasibility of a project, we have the tools and expertise to help make business decisions. The more involved we are, and the more information a producer shares with us, the better able we are to understand their operation, go to bat for them, and ensure their current and future needs are met.”

Holly Spencer, Senior Client Relationship Manager, Agricultural Banking

Since farmers are busy during their peak seasons, the annual review meeting with your banker in the offseason is a great time to openly raise your short- and longer-term goals. Discuss your immediate credit needs, like equipment upgrades, as well as anticipated requirements over the next 12-18 months, such as a barn build. This will enable your banker to diarize such needs for the year(s) ahead, and advise you on ways to fine-tune your financial condition now, for a smooth credit approval when the time arrives. 

You should also share any ‘blue sky’ ideas with your banker. For example, if you’ve had your eye on your neighbour’s property, share this vision with your banker so they can potentially provide credit pre-approval, so you’ll be ready to bid with confidence if that land goes on the market.

Noting that busy farmers are not always sure what information to bring to their banker, Dariann Kloot suggests they make a quick call before the meeting: “I love when they call ahead and say ‘I have this idea, what information will you need from me?’ Then I can tell them what figures to get from their accountant, or I can help arrange a new appraisal on their property for larger credit requests. Sometimes I’ll say, ‘Just do some back-of-the-napkin math and be ready to explain your estimates to me, what you need, and why’.”

Talk, for a smooth transition:

This ‘talk early, often and openly’ approach is particularly helpful when a family farm faces a leadership transition from one generation to the next.   


“It’s important to start these conversations early, both among family members, and with the right financial, accounting and legal advisors, since different generations might have contrasting views. You want to get everyone’s opinions on the table, and work through them over time, so everyone will get along at the end of the day.”

Jeroen Slits, Client Relationship Manager, Agricultural Banking, SW Ontario

He adds that it can be helpful to have an impartial mediator to facilitate the discussions and navigate any emotional topics. The old adage, “Fair is not equal, and equal is not fair,’ alludes to the intricacies of drafting a solid succession and estate plan, so it is important to involve qualified advisors early, to work through these details. A good Agricultural Banking Specialist will connect their clients with the right advisors to help write their wills and estate plans, and help ensure harmonious family relations during the succession planning steps. 

In addition, some farm owners wisely involve their children in the farm’s financial affairs - and introduce their advisors to their future successors - well before any transition, to build their leadership confidence and capability.

Working with the right partner: Since good communication often depends on having the right partner, it’s helpful to reflect on the quality of your relationship with your bank, and evaluate the promises and performance of your prospective or current banker. For example, does your relationship manager have the right experience and expertise in your business? Do they express interest in your operation and goals?  And, how committed is the bank itself, including the level of agriculture sector specialization within its credit approval and administration groups who will approve and support your financial needs? And, does your bank offer flexible financial products and solutions that can accommodate your changing needs? 

Finally, think about your relationship manager’s track-record keeping in touch with you. Although busy farmers don’t want too-frequent banker visits or calls, that individual should definitely customize their outreach, based on your needs. And, they should reach out to you whenever market or operating conditions change.

Sums up Shuh: “Imagine a banker that calls to say, ‘Hey, I’ve been hearing in the market and from some local connections that the price of feed is heading up, how are you managing, and what can we do to help?’  That’s the kind of proactive and responsive communication a dairy producer deserves, with a banking partner who is ready to talk early, often and openly about the future of your operation.”