AgriVision Episode 13 – Many farmers struggling to stay current on bills

Katie Wantoch
This is UW Extension’s Farm Management AgriVision Podcast. I am Katie Wantoch, Agriculture Agent with UW-Madison Division of Extension. I will be chatting with fellow Extension Educators as we answer questions from farmers and share our knowledge and expertise on how you can improve your farm management skills. Today I am joined by Stephanie Plaster, Agriculture Educator in Ozaukee and Washington counties. Welcome Steph to the podcast.

Stephanie Plaster
Thanks for having me.

Katie Wantoch
Steph. Today’s question is from a farmer who reports that he and his son are finally making money on their 150 cow dairy farm. They farm 325 tillable acres in Central Wisconsin and their milk checks are finally in the black. However, the farmer does have some bills to catch up on. He reports that they owe the vet $1,200, the feed mill about $7,000 and the John Deere dealer $8,000 for parts and repairs. They have been staying current with each of these businesses and paying down some of the amount they are behind on each month. The farmer is wondering if they should take out a loan at the bank to pay these balances off. He was afraid to ask for a loan at the bank last spring because he wasn’t sure if he would be turned down like many of their neighbors. The farmers mentioned that they got behind on bills because they didn’t borrow money to plant crops last spring. Steph, do you have any advice for this farmer and his son?

Stephanie Plaster
Yeah, so in situations like these, one of the first things I like to do is take a moment to pencil out all of the debt the farm has to make sure nothing is being forgotten or missed. And then ask them if they’re current on all the other outstanding debt. Because if that’s the case, then they may be able to create a repayment plan with those three open accounts to get them back on track without taking out that additional loan that they’re talking about. So they seem to be in a good position to be able to stay current and continue to pay down that which they owe, which is actually a really good place to start. And so if they would prefer not to have outstanding debt hanging over them, they may want to consider selling off some assets. Just make sure those assets don’t have liens on them or they’re not collateral used to secure any of the additional loans. Cashflow forecasting can also be a useful tool to help them figure out how much they should be able to afford to pay back over the coming months to year.

Katie Wantoch
If they want to reach out to a lender, what do you suggest might be their first step?

Stephanie Plaster
So first step, when reaching out to a lender, I think it’s really nice to come in having all of your financial information up to date, having it correct so that when you have that conversation with the lender, you know your position and you’re able to share that with them quite openly. You don’t want to be hiding anything when you have that conversation with the lender because it’s not going to get your relationship off to a good start.

Katie Wantoch
Definitely making sure they have that list of their past due balances. And if they have any foreseeable needs for additional financing in the future. Certainly some things to talk through and their lenders should be able to provide them with that guidance and some thoughts on their next steps for their farm business. Thanks, Steph. For that great advice. I would suggest starting a conversation with your bankers sooner than later and definitely staying current with those creditors. Appreciate your time today, Steph.

Stephanie Plaster
Yep, thank you very much.

Katie Wantoch
For more extension Agrivision podcasts or resources to improve your farm management skills, check out farms.extension.wisc.edu. Thanks for listening.