5. You can get a shorter term by refinancing.
This doesn’t happen often, but is wonderful when it does! When rate differences are significant enough that refinancing existing poultry debt results in a lesser term with similar payment amount – seriously consider it. If you can afford the projected payment on the new loan, you will save money in interest AND pay off your debt faster. If your interest expenses are going to decrease significantly, it might be a good idea to give your accountant a heads up before the tax year has ended.
6. You need a do-over. In the course of managing a poultry farm, debt can get out of hand.
Sometimes you may need to combine all poultry related debt and refinance. It can be difficult to get credit card debt refinanced into farm debt, but if the credit card was used for farm-related expenses, gather statements or receipts that prove it. In addition, smaller loans that have been made for repairs, maintenance, or operating costs can possibly be refinanced, providing a longer term to help cash flow.
A do-over only works if you’re dedicated to make necessary changes in the future. Whether cutting back on personal expenses, re-evaluating hired labor costs, or making some other expense-saving decision, plan accordingly as you begin the refinancing process. If a reduction in poultry income is the problem, use the refinance to help plan expenses and payments based on the lower income. Make a conscious effort to save as much as possible if that income increases either temporarily or permanently.
Lenders will complete projected cash flows that include supplies, repairs, maintenance, and other expenses. First, make sure you agree with the projections and then consider using them to help you create a budget. Think about cutting back on what you can and making an emergency fund for when you have unexpected repairs or a bad flock of birds. In the poultry business with limited lenders, eventually a farmer runs out of options for refinancing if they have to combine debt every few years.
Conclusion
Every operation and farm family is different, so determine what’s best for your situation when it comes to refinancing debt. Always know how a refinance will affect you both today and in the future. Contact your accountant if your annual interest expense will be greatly reduced. Keep a record of any closing costs/fees for tax purposes. Seek a lender that understands the poultry business and knows how to set up your loan term and payments based on that knowledge. Refinancing might be the right choice if it meets both short/long term goals, saves money, increases cash flow and/or is needed to keep the poultry farm in operation.
