Mind Your Farm Business, Ep. 50: Leverage and liquidity — making the most of a low interest rate environment

In an era of “cheap” money, farms could take advantage to solve working capital shortages, set aside savings, or plan for a business transition. But debt restructuring, or taking on more debt even at low rates, is not without its pitfalls.

For this episode of the Mind Your Farm Business podcast, Terry Betker, president, and CEO of Backswatch Management unpacks what a low-interest rate environment might mean for farms at all stages of business maturity.

Solving a working capital problem — being asset rich, but cash poor — is a great reason to restructure, Betker says, but too often, farms that take on a restructure often don’t go far enough. There are emotional or risk-aversion reasons, perhaps, to want to limit big numbers for long-term debt, but he says it’s better to do it right the first time, rather than re-visit a lender 18 months later for the same reason.

In looking at the decision, Betker says it’s important to determine what working capital is needed and what the residual debt servicing commitment looks like.

Low-interest rates should also spur discussions on business transition, too. Succession planning is a business management task, as emotionally-charged as it can be, and shouldn’t ever be a short-term event. Low-interest rates can be a great catalyst for planning out the next five, 10, or 15 years for the business transition and intergenerational transfer of assets.

Listen on for a discussion on interest rates, locking in rates, and more in this Mind Your Farm Business episode:

Disclaimer: Royal Bank of Canada and its subsidiaries are not responsible for the information provided in this podcast, and this information does not necessarily reflect the views of Royal Bank of Canada or any of its subsidiaries. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its subsidiaries.

Leave a Reply

 

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Privacy Preference Center

Necessary

Necessary cookies help make a website usable by enabling basic functions like page navigation and access to secure areas of the website. The website cannot function properly without these cookies.

gdpr, __cfduid, PHPSESSID, wordpress_test_cookie, woocommerce_items_in_cart, woocommerce_cart_hash, wp_woocommerce_session, wordpress_logged_in, wordpress_sec, wp-settings, wp-settings-time, __cf_mob_redir, wordpress_cache, realag
__cfduid

Marketing

Measuring interactions with the ads on the domain.

__gads,fsk_ut_2317
scmtid,v,a,JSESSIONID
IDE

Statistics

These are used to track user interaction and detect potential problems. These help us improve our services by providing analytical data on how users use this site.

_ga,_gid,_gat,_cb,_chartbeat2,_chartbeat4
_ga,_gat
_ga,_gid
metrics_token

Preferences

Preference cookies enable the website to remember information that changes the way the website behaves or looks, like your preferred language or the region that you are in.

chartdefaults, comment_author, comment_author_email, comment_author_url
JSESSIONID, _os_session,anonymous_votes,csrf-param,csrf-token,user,user-id,user-platform,intercom-session,intercom-lou,intercom-session
personalization_id, tfw_exp