During challenging times, balance can be comforting
Our farmers, ranchers and producers are working hard to stay afloat in these difficult and challenging times. When we consider the dynamics of weather, unstable market conditions, increasing expenses and often, increasing debt, it’s remarkable that so many survive. In challenging times, searching for that level of balance can be both important and comforting.
From a financial perspective, balance is important. A lender looks for some balance and equity in your balance sheet as well as in your cash flow projections. We’re all concerned about income vs. expenses, and rightly so.
A prudent banker is tuned in to this as well. In a difficult farming environment, that same banker will search for ways to ease the burden by finding the right tools to help. This can be accomplished through simple payment forbearance, payment restructuring, re-amortizing your debt, payment extensions and other servicing options. If you’re in good standing and managed your business, your banker will want to help.
Think about your balance sheet. This document represents an ever-changing picture or snapshot of your overall financial position. Here again, we’re looking for balance. You don’t want to be overweighed to a large degree in any one area.
Too much short-term debt (credit cards, feed or co-op tickets, etc.) can impact your short-term repayment position. In general, you would like to see more asset and debt reflected as long-term items. Your banker is looking for areas of equity where you have a significant asset base compared to the corresponding debt.
Some balancing questions:
• Are your short-term and long-term debts supported by appropriate assets?
• Do you see an opportunity in restructuring to help stretch out some payments?
• Where is the most pressure on your balance sheet – where can you reposition to relieve that pressure?
• Are there “bankable” assets that can be used to help support loan repayment?
In farming, as in life, finding balance is an on-going challenge and opportunity. A cattle producer searches for the right balance of acres per cow and grass vs. supplements. Poultry producers and livestock feeders are looking for the best ratio of feed to gain maximum pounds. Crop and forage producers want the right balance of seed quality, fertilizer and soil amendments to gain maximum yields.
“Work, love and play are the great balance wheels of man’s being.”
– Orisen Swett Marden
Financial balance helps in many ways. By re-positioning, if needed, you can not only relieve the pressure but also make more of your asset base work for you. Ask your banker, financial advisor or another trusted financial friend to take an objective look at your financial position. A fresh set of eyes can offer constructive ideas and suggestions, often at no cost.
“We come into this world head first and go out feet first; in between it’s all a matter of balance.”
– Paul Boese
Balance impacts and affects us all. Periodically, it’s prudent to take a step back from the daily routine and really look at our operation relative to our families and everything else important to us. Consider a weekend away, if possible. Use that time with your spouse and family to re-group and reflect on what’s important in your future.
Ultimately, we’re all searching for that elusive work/life balance. The search is worth it and the benefits can be profound.
Ken W. Knies is an agricultural and rural consultant. He holds a bachelor’s of science and arts from the University of Arkansas and a master’s of business administration from Webster University in St. Louis, Mo. He formed Ag Strategies, LLC as a business unit focused on quality borrowers and lenders.