As growers are getting ready to head to the field for harvest, they are making plans for the 2018 growing season. But when it comes to making major equipment purchases, they may need to play ever further out than that. Vince Bailey, with Farm Credit Mid-America, says the best way to plan for machinery purchases is to make a 3 year plan, “If you can make a plan for machinery and capital purchases for 1 to 3 years out; and then share that with your lender; and then secure sufficient financing or at least commitments well in advance of the purchase.” He added that, if cash is an issue, then leasing may offer a more workable alternative.
Bailey warns that using an operating line of credit for equipment purchase may pose some dangers, “A producer could run out of operating cash before his production season is over.” He said using operating loans for equipment purchases disrupts the balance sheet of an operation, “This could have unseen long terms costs to your operation and impact your relationship with your lender.”
Bailey made his comments during the Financially Speaking series here on Hoosier Ag Today radio stations this week. Farm Credit Mid-America has on-line resources and insights visit