By Tim Halbach
As I listen to clients describe the financial struggles they are having, it seems like a good time to share a few ideas that some of them have had to help improve their cash flows:
• Sell land. Do you have some woods that perhaps a neighboring landowner would like to own? Maybe that neighboring landowner has farmland to swap with you. Or perhaps you have neighbors who would like to expand their country lots, and you own the field that surrounds their lots and homes.
• Sell other assets. Do you have any machinery or cattle you can sell? It should be noted that if you are selling assets, including land, your lender likely has a security interest or lien in those assets, so you would want to get your lender’s consent before selling any assets outside the ordinary course of business.
• Negotiate. Hopefully you have a lender who is willing to work with you and, for example, may be willing to allow you to pay interest only on your loans. For other creditors such as the feed mill or custom harvester, negotiate a payment schedule. Often, such creditors are willing to reduce interest rates and avoid lawsuits in exchange for reasonable monthly payments.
• Explore government programs. For example, Congress has revised the Dairy Margin Protection Program to allow for increased payouts, and dairy producers can re-enroll in the program through June 1 — which would be retroactive back to Jan. 1. Contact your local Farm Service Agency office. In addition, have you considered whether you are eligible for Social Security, Social Security Disability, food stamps, subsidized health insurance or other government benefits?
• File for bankruptcy. No one likes the idea of filing for bankruptcy. However, bankruptcy is designed to give debtors a “fresh start.” In fact, a Chapter 12 bankruptcy is specifically designed for farmers and allows them to set up a repayment plan. To be eligible, a farmer must have less than about $4.1 million of debt. However, if you exceed that much debt, you may still be eligible for a Chapter 11 or Chapter 7 bankruptcy.
• Sell. Sell before it is too late. If too many farms are going out of business at once, will land prices fall? Just because you are the fifth or sixth generation on the farm does not mean you have to continue it to your own detriment. Farming today is a lot different than when your ancestors farmed.
• Expand. Do the current low market prices for cows and feed create an opportunity to generate additional income if you expand your operation?
• Find off-farm income. The unemployment rate in Wisconsin is at an all-time low of 2.9%. There are more jobs available in Wisconsin than there are employees to fill them. Can you or your spouse somehow work off the farm, maybe at least part time?
• Ask for help. Ask your accountant, lender, creditors, neighbors, attorney, local Extension agent or the Wisconsin Farm Center for ideas or help.
Halbach is a partner in the Chilton, Wis., ag law firm Twohig, Reitbrock, Schneider and Halbach S.C. Call Halbach at 920-849-4999.