|
South Central Iowa | Paying down long-term debt is not asking for a foreclosure. I can see your point for a renter, but things are different for owner-operators with term land debt, it's not even remotely similar. It doesn't make sense for us to hold cash; we reduce debt further or purchase additional assets holding debt steady. If a bad year occurs, we roll until a better one. If the roll becomes large, we term it out. What matters is our loan to value, whether that increases or decreases, as well as our debt coverage ratio and free cash flow. I don't have a problem or need to roll loss anyway, but the option easily exists, I don't need to leave free cash in my current asset column. If I want, I can have $1,000 an acre brought upfront for liquid working capital. That wouldn't make a lot of sense because I would only increase my liability side on long-term and make that ratio worse. But then I would have a $1,000 an acre in case something bad happens I guess, and I can pay $50-$60 an acre a year for that privilege..... Nah..... Maybe if the stock market crashes..... 4% money again to buy into stocks when the Dow is at 12,000.... hmmmm.... | |
|
How much working capital per acre does your lender want?
