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southern MN | Borrowing money for land, good machine, etc seems pretty normal use of money. Borrow some to make yourself more productive, it pays off over the years better than the intrest rate cost.
The operating loan to finance year to year purchases is a bit more questionable. That is not long term debt. It is closer to credit card, consumer debt. Short term, higher intrest, higher risk stuff. It isn't giving one that long term outlook.
Some here seem to have a pretty good setup with per buying inputs in December, paying off the loan with sales by February, and it is a nice tool to make financial flow. If the loan was yanked away they would not have much discomfort, it would just change some buying and tax planning habits.
Those that need the operating loan to make it through from year to year, and are scraping by to get it paid in 13 months so e years......
Those folk might have bit off more than they should have, or are in the 'expand is the only way to operate a business never mind the costs' mode and they will likely cause the community some losses some day when they have a hiccup and can't meet their obligations. They are so focused on getting bigger they aren't focused on having a business.
My view of it is that the year to year operating loan isn't a bad thing, but it would seem part of operating a business would be to want to grow it into a solvent, sustaining operation that wouldn't need that short term credit every year to get by.
Some folk worship holding on to what they have. Those folks will get chastised for being old money, too dumb to grow their business, just in the way. They let too many oppertunities pass by and are of no value to the community.
Some folk worship expanding over any other thing, and need to own an entire county, they might not pay attention to growing a crop or improving their land, but they need to be bigger, bigger, bigger. They will get chastised for wiping out the community, neighbors, and always going bankrupt and leaving others holding the bag after every down trend in agriculture, which seems to come every 20-30 years.
I suppose the truth is some where in the middle, those that have an operating loan available but are lot he to use it.....
Paul | |
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Should a established farm need an operating loan every year??
