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How much working capital per acre does your lender want?
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sand85
Posted 1/16/2019 21:38 (#7250293 - in reply to #7250134)
Subject: RE: How much working capital per acre does your lender want?


C IL
Clearly these guys are loaded, have excessively conservative bankers or no bank competition, and/or farm on the ‘fringe’ where things are getting a little extra tight financially.

I farm in an old German area and while there are guys who operate with cash it is much more likely that guys have an overall debt to asset ratio of 10-25% and a tight farm current ratio of 1-1.5. Global current ratio might be 2.

Competitive area and cash gets put back into land and animal buildings whenever cash flow allows, so current ratio climbs until that next building or land purchase and start over.

Crop insurance and blanket liens put banks in a strong position, and strong demand for land/animals/low overall debt to asset ratios support land prices and thereby overall financial position.

Most guys here can push a pencil and find something that returns them more than 4% for operating money.

Edited by sand85 1/16/2019 21:43
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