Tying up financing that is needed for operating costs, such as equipment, can lead to trouble down the road. Farmers can potentially run out of operating credit before harvest and have to pass up a good opportunity because they don?t have cash or credit available.
So, how can producers plan ahead for equipment purchases instead?
?It?s best to plan out machinery purchases well in advance and secure sufficient financing for those purchases to avoid losing money because of financing costs, said Vince Bailey, Senior Vice President of Ag Underwriting with Farm Credit Mid- America. ?Farmers can also consider a lease that offers a lower annual payment, combined with a limited down payment requiring less cash up front.?
Bailey says that operating lines of credit are designed to accommodate short-term purchases like input costs and therefore have a higher interest rate and that paying a percentage point higher to finance a long-term purchase can have unforeseen long- term costs.
For more financial tips, insights and perspectives from Farm Credit Mid-America visit e-farmcredit.com/insights.
AUDIO: The Ohio Ag Net?s Ty Higgins visits with Farm Credit Mid-America?s Vince Bailey about planning for an equipment purchase.
