When is the best time to get a farm loan? Generally, the best time to get a farm loan is in conjunction with Tax planning around this time of the year.
The primary reason is that most CPA’s and tax planners will be seeking strategic money saving opportunities for their clients such as carrying over income into the forthcoming year, holding back expenses in the current year, and numerous other strategies to reduce your tax liability. Your banker, on the other hand, is looking for the exact opposite, as cash flow is a key component in qualifying for a new loan. By reporting higher income, you position yourself to access larger amounts of credit with lower interest rates. So, in turn some tax strategies used to reduce your income can decrease your chances to secure financing for your farm operation.
With rising interest rates and inflation currently in the forecast; combined tax and strategic financial planning have become more important than ever.
To combat some of the highest inflation seen in many decades, the Federal Reserve has just issued its first interest rate hike since 2018 with plans for more in the coming months and years. Securing a farm loan in a time when rates are on the rise, but remain near historic lows, will help set your operation up for success in years to come.
Inflation’s biggest threat to producers is the increase in input and production costs. Which you have likely already seen in terms of fertilizer prices, supply chain and labor issues etc. On the positive end, the inflation we have seen has also come with it a great deal of positive effects such as; skyrocketing commodity as well as increasing land prices. Where the increased equity allows for additional financial leverage and go a long way to balance out the negative effects.
Big picture, though rates are on the rise, they are still near historic lows and significantly below current inflation numbers. Which creates a perfect opportunity to leverage your current land assets and yield potential into future growth and stability.
The team at Farm Plus Financial understands this fine balance and would be happy to discuss with you current operation’s situation and options. We can often provide assistance with tax planning measures to benefit your financial standing. In addition to valuable insight into your cash flow from a debt obligation perspective, this will also help identify the right farm loan for your operation. Especially important in these current economic times is securing the right loan and locking in long term payments, which your farm operation can afford, which will result in long-term success and significantly reduced risk to your family and operation overall.