One thing that's interesting to me about banking is how it adapts to serve different business sectors. In some sense, a loan is a loan is a loan, but the needs of, say, a car dealership are much different from the needs of a real estate developer.
A couple of weeks ago, I had a chance to speak with Michael Dixon, vice president of agricultural banking at PNC Bank. (We spoke during National Agriculture Week, which PNC commemorated with some promotional outreach initiatives.)
Dixon's clients include all sorts of farmers — dairy, row crop, fruit — as well as feed mill operators and farm equipment dealers. He's been in agricultural banking more than 20 years, he said.
In our conversaton, he emphasized the importance to farmers of cash flow. Many farmers get paid just once a year, when they sell their crop, he said, so they need careful, prudent management to stretch that single paycheck over 12 months.
We talked about farmers being asset-rich but cash-poor. As land prices rise, farmers find themselves sitting on acreage worth millions of dollars that may only generate a few tens of thousands of dollars in income, if that.
That can create major problems at tax time, and it also can make asset transfers tricky — the rationale behind Pennsylvania's abolishment last year of the inheritance tax for working farms.
PNC's wealth-management department works with its ag bankers to address such issues and craft workable succession plans for farm families, Dixon said.
The majority of PNC's ag bankers — about 80 percent — are farmers themselves in some capacity, Dixon said. They know the issues farmers face first-hand.
"Myself, I live on a beef farm up in Tyrone, in Blair County," Dixon said.
"Basically I'm free labor," he joked. "I'm there to help my brother when he needs me."
PNC works with its ag clients in a "consultative" capacity, Dixon said. He emphasized the bank's breadth of product offerings and its technology — treasury-management systems enable clients to get checks cashed and funds made available overnight, for example.
Younger farmers are more likely to have studied agriculture in college, and they tend to be more sophisticated about farm finances, he said. Of course, young farmers are a relatively scarce commodity. The average age of farmers is 57, Dixon said.
The older generation, by and large, "is not as advanced," Dixon said. "We work with them. ... We help them get through it.
"It's like I tell my farmers: Knowing your cows is important. Knowing your financial situation is just as important."
Substitute other products and services for "cows," and I'm guessing that's a statement every businessperson can agree with.