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Frytown, Iowa | IF (I don't) I had 5000 acres of crop to put in at an average of $600/ac plus another 2,000,000 in termed debt i would have a revolving credit of 3 million. I think your saying that it's stupid to have a 3 million dollar operating note you don't use because you have 3 million in cash to put in your crops and still have the 2 million in termed out debt.
I say it's smart because your termed out debt is fixed where your opp note is variable.
Always pay off the operating note first. You are not saving money by paying off term and leaving yourself exposed to a variable interest rate. My opp note currently has a touch higher %.
Very few have their opp note paid off... But if they do... And they don't pick up anymore acres... Then the extra cash should go towards term debt.
There is absolutely not one advantage I can see to pay off a term note quicker than an operating note.
If it's done right you shouldn't have cash in the bank much at all. Maybe a month at the most. If anything you would be buying inputs before you cash your grain checks and you should have a debt free opp note 6-8 months out of the year | |
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Pknoeber and other bankers- working capital from down below
