Managing Credit and Cash Flow Under Difficult Marketing Conditions

Current cattle markets have severely reduced the cash flow of many beef operations. Here are some steps you can take to help you manage cash and credit flow:

• Assess your current situation regarding cattle, feed and housing.
• Examine the ability of your farm business to meet its cash obligations over the upcoming months.
• Communicate with your creditors as soon as possible to discuss the details of your current situation.
• Provide lenders with an assessment of your cash flow and credit needs. Your lender can supply you with a financial analysis workbook to prepare this information or, alternatively, use OMAFRA's Farm Financial Analysis and Planning Workbook (Publication 37), a step by step system for producing a cash flow statement in either the hard copy workbook or in an electronic Excel spreadsheet format. Access this document OMAFRA's Business Development Tools and Calculator Webpage and download Publication37ver1.xls.

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Additional Considerations

Accounts Payable: Feed, fuel and other input purchases carried for more than 30 days on account with suppliers may be subject to interest charges of two percent or more per month. Discuss your current situation with these creditors as well. Options to consider for interest cost reduction and cash flow assistance include the following:

ACC Farmers Financial: Agricultural Commodity Corporation, 1-888-278-8807.

• Advance Payments Program - provides advance payment on crops grown and placed in storage by the applicant. Crop insurance is not required for this program. There is provision for on-farm feeding of some crops.

Operating Loans: If negotiating with your lender to increase your operating loan to cover your projected cash flow deficiencies is not a realistic option, an alternative may be to term out a portion of your operating loan to free up additional working capital. Another option may be to negotiate for a deferral of existing principal payments on your term debt and make interest only payments for a period of time. Prepare for your meeting by summarizing changes to your marketing strategy for both the short and long term, current costs of production, and cash and financing needs for now and in the future. OMAFRA Factsheet Troubleshooting Your Farm Business - Identifying and Managing Financial Pressure (Order # 00-107) includes a detailed list of questions that can prepare you for meeting with your lender. Be prepared for the possibility of increased security being required by your lender. OMAFRA Factsheet - A Guide to Agricultural Security Agreements, can help you understand what you may be asked to sign.

Net Income Stabilization Account (NISA):

• Call NISA at 1-800-665-6472 to determine your eligibility for a 2002 withdrawal, if you have not already received your 2002 Deposit Withdrawal Options Notice.
• Contact NISA for information on your options regarding early access for the 2003 program year.

Bottom Line… Keep Creditors Informed - Assess Your Cash Flow - Assess Your Options

Related Links

• OMAFRA's Business Development Tools and Calculators Webpage
• A Guide to Agricultural Security Agreements

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