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n. Illinois | A little operating debt is okay, A lot of operating debt is the Number 1 cause of farm business failures. It is a continuous balancing act, Keeping enough working capital to sustain your cash flow if operating results are less than expected. Ag bankers are just as bad as farm operators in understanding the importance of working capital. There is no ultimate answer to how much cash/financing. I do know there is way too much short term debt in a lot of large cash grain operations and that is the catalyst to their ultimate failure when there is a black swan event that nobody saw coming. (maybe this Virus is the Black Swan and we can't see it yet) It took several years for the high interest rates in the early 80's to be fully realized as the black swan event that it was. IE in 1980 no one thought that the rates even though higher would last as long as they did or get as high as they did. But by 1985 it was realized for what it was and the correction was well under way. Keep enough powder dry to fund your next years operating costs without the use of the bank funds.
Edited by Reality speaks 9/28/2020 19:59
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paying cash vs financing
