It’s the unfortunate reality of rising interest rates, down markets, and just plain bad luck, but some farmers will experience having their loans and mortgages called in by their lender.
Facing a financial crunch can be stressful, emotionally-charged, and difficult. Eric Olson, national leader of farm management consulting for MNP, says that farmers don’t need to go through the process of refinancing or facing insolvency alone.
The overall financial picture for many farms is not as bleak as, say, the infamous early 80s where double-digit interest rates combined with low equity meant many farmers had to walk away from the farm business, Olson says. Most farmers have a strong equity base to work with when facing insolvency, but that doesn’t mean it’s not still difficult and complex to work out from under.
Olson adds that looking ahead and anticipating that servicing debt will become an issue — before it actually is — can help, as it allows some time to either sell assets or restructure debt to better manage cash flow.
Still, there will be hard decisions to make, Olson says. Some ventures may have to be ended or land sold to ensure the long-term viability of the farm, and that comes with tough emotions to carry. Olson adds that reaching out to a farm management consultant well-versed in insolvency is a key step to navigating what’s ahead. The lender employees dealing with a case have dealt with this type of situation all the time, he says, whereas farmers may never have had to before. Experience with what’s possible is key.
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