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How to Successfully Manage Farm Debt

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hay bales farmlandTo effectively manage your farm debt, all pertinent financial information must be current. When assessing your farm’s debt, be sure you’re aware of the following factors. 

Loan Data

Compile all of your loan information, including data on operating loans, mortgages, and other term loans. For each loan, list

  • Current principal balance
  • Any past-due principal
  • Accrued interest
  • Terms of the note
    • Interest rate (and whether fixed or variable)
    • Payment frequency
    • Maturity date 
Operating Loans

For all operating loans and loans that will be due within 1 year, list the total of all principal and interest due, including any past-due principal and accrued interest amounts.

Term Debt

For term debt, list all principal and interest payments for each loan for each year until maturity. Then, calculate

  • The total principle and interest payments on term debt for each year
  • The total principal payments on all term loans for each year
  • The total interest payments on all term loans for each year


To determine whether your present farm debt is manageable and appropriate, develop a budget that includes the following financial information:

  • Expected revenue for each month in next production year and the following 3 to 5 years
  • Expected production expenses in the next production year and the following 3 to 5 years


Financial Health Measures

Once you’ve compiled these numbers, you can use them to take an objective look at your farm’s financial picture and debt load. Ask yourself the following questions:

  • Is the total value of all unsold crops and livestock or livestock products greater than unpaid production expenses, current operating loans, and accrued interest?
  • What is your present working capital (current assets minus current liabilities)? This is important for you to know for your own management purposes as well as to have available for lenders.
  • What is your operating profit (total expected revenue minus expected production expenses)? Is it enough to cover all of the following?
    • Total term debt principal for the next year
    • Interest on all operating loans and term loans for next year
    • Funds for needed asset purchases in the year or years ahead
    • Family living expenses and taxes

By organizing the relevant information, you can clearly see how well you can expect your farm business to weather the coming years. If you see trouble ahead, now is the time to determine what your operation can do to correct course. If you’re unsure, seek the help of an experienced professional financial consultant.

AgriSolutions provides ag-specific financial consulting services to family farm owners, helping them to become more effective financial managers and keep their operations profitable and sustainable for future generations. Read our case studies to learn how we’ve helped farm families like yours, or click the link below to request a free consultation.


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