Friday, October 24, 2008

The Credit Crisis and Agriculture

We've all heard the word "bailout" way more than we need to. Hearing it is a reminder of the economic problems we now face and what caused those problems. The credit markets are in turmoil predominantly because of the so-called "subprime" mortgage mess. But, what does it mean for agriculture?

With limited amounts of credit to provide, lenders will be looking for safe debt. Who is most likely to pay? Without direct government intervention, I don't believe that agriculture will be any different. As a farm operator, you will need to show your lender(s) that you are a safe bet. Clean up your credit report, be sure that you can cash flow your business operations, and make sure your balance sheet is in order. Talk to an accountant about ways to position yourself to be a better credit risk.

If used correctly, debt is a powerful tool that allows you to make money by using other people's money. So, avoiding debt entirely is unwise for most farm operations. But know how to manage your debt. If you do, you should be able to weather the storm.

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