|
Evansville, WI | Well I did answer privately in an email to the original poster whom I know, and I shared far more details with then I would ever post on the internet. I did post an answer, I said 30% is way to high. 300K in payments on a million gross is not sustainable in the long run and would likely be challenging in the short run.... doesn't take a lot of analysis to see that.
I didn't suggest percentage because using gross income isn't a good way to analyze, if there is zero net left after paying for everything else, that ratio of payments to gross doesn't matter because you can't make your payments anyway.
The actual ratios bankers would use for the question at hand are:
Term Debt and Lease Coverage Ratio
(Net Farm Income From Operatons + Depreciation Expense +Interest Expense - Income Tax Expense - Family Living Withdrawls) / (P&I payments & Leases)
Greater that 150% is strong
110% to 150% is stable
Less than 110% is Weak
Debt Payment/Income Ratio
(P&I Payments + Leases) / (net farm income from operations + depreciation expense + interest on term debt + interest on captial leases)
Less than 25% is strong
25 to 50% is stable
greater than 50% is Weak
| |
|
|
Debt repayments, P+I as a % of gross income - ? for crop farms
