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Hennepin, IL | Im gonna start by saying theres no free lunch no matter what you do. That and about anything you do to eliminate the operating note without just strictly paying it down and operating on your own cash will likely take more discipline than having an operating note. Ive kinda been doing some pondering lately if theres a better way to handle an operating note.
Baseline program if youre not already using cash for inputs would be to borrow on your equipment for 5-7 years enough to operate and just operate on your cash. Downside (?) to that is you might get in situations where your cash is sitting there doing nothing for 6 months. Im not convinced year in and year out you really save much outside of tax planning by prepaying inputs. Seems like theres enough years that fertilizer comes down in late winter/early spring and some fire sales on seed that same timeframe that you negate the years that buying early does pay. The exception is probably buying fertilizer and chemicals out of season and taking possession at the same time, but theres a lot more to that from a cash flow standpoint and may actually necessitate you borrowing more to operate on.
Ive kinda looked into the Infinite Banking Concept a bit. I havent dove in very far yet so idk if its even something worthwhile or not. Ive known about it for years but some recent conversations have me researching it a bit deeper. What Im thinking is utilizing the life insurance policy to borrow against for operating so that if/when I get in a spot where money might be sitting there for a few months, it can be earning interest.
Ive also wondered about doing the same but borrowing against a funded brokerage account holding say S&P funds or something like that thats a little more volatile but will have better returns than an insurance policy. I have no idea how you would go about this and it hasnt been more than just a fleeting thought.
Another thing my wife and I have done is put money in a CD and borrow against that. Bank took a 1-2% spread when the money was loaned out but I believe they wouldve let us move money in and out like a revolving account. We didnt, so idk if they actually would have, but the repayment plan was flexible so it wouldnt surprise me. | |
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Multi year operating loans? (Locking in lower interest) or a real estate equity line of credit?