The Lucknow Sentinel, 1980-04-02, Page 33Hackett Farm Equipment
Luchnow ' Phone 529.7914
financial planning, outline squeeze on •your working
why they are necessary and capital and a disruption of
suggest ,ways to • approach plans for future capita!
each planning function. Sub, spending.
jects will include: PARTIAL BUDGETING -
RECORDS:—Keeping_rec- What willhappeninfinairJal
ords of income and expenses terms if you make a change
helps you measure the strong in your farm operation?
and weak• areas of your farni- What new activity will prod-
ing activities; up-to-date fig, , uce the best results? Partial
,ures help support. your bor- budgeting - using a few key
rowing plans and indicate income and expense figures
your ability to repay loam.' in a formula -- can give you
OPERATING. LOANS 4 the answers in advance.
Shor-term operating loans MACHINERY PUR
are used to finahce the on- CHASE - If Yon need new,
going need for materiala';---maehinervtliere-are options
supplies and labor
they
to buy, lease or rely on
the year; ideally', they should custom hiring. It's important
be of the "revolving" type, to work out the, hourly, an-
to give you greater flexibil- nual and per-acre costs of
it owning a particular machine,
LONG-TERM CREDIT -
Mortgage loans increasingly
fill the farm operator's need
•for • long-term credit for
lamtpUrchases, property ling
proyements, and other pro-
ject's. It's important to plan
your 'oVer.all credit needs, at.
the time yOu consider a
mortgage loan:
farm financing •seem cow
Alex, you" can and should
undertake the broad aspects
Of *in. financial planning
and avoid tbe :'hazards of •
guesswork, of the "trialand-
error" approach. Farniing
today is large.scale business,
and calls 'for, sound business
management.
This is the first
went in a *rids on 'farm
financing prepared by The
Royal. Bank of Canada's ag-
ricultural services depart-
Rising ,farm costs, a
squeeze on net income and a
greater need for capital all
underline the importance of
financial planning on, the
farm. .
This is the pattern:
The pressure on farm net
income of recent Years. maY
continue to the mid41980s,
before world demand -for
farm products turns this
trend around, according. to
farin economists.,-.
— Inflation, to whichfartnert'
are especially vulnerable,
may worsen as, energy costs
soar -- possibly pushing the
inflation rate from' an .annul.
.9% .9% per cent into or beyond,
the 10 to 11 per, cent range:
-- Short and long-term credit
needs of farniers likely will
increase. °
For Canada's 100,000 com-
mercial farm operators, then,
sound financial management
is more important than ever
before,
That means using tech-
niquet to forecast future re-
sults, to identify profitable
operations, to spot and cor-
rect trouble areas, 'to project
your needsT-for--credit and
your ability to handle the
credit.
Starting thiS week, a series
of columns entitled. The Fin-
ancial 'Side of. Farming will
discuss the main elements of
LINE-OF-CREDIT
ShOuld you borrow, only on a
piecemeal basis to the am-
ount 'of collateral you can put
,up for each specific loan? To
avoid limiting yourself in that •
way, you might consider
"Line-of-tredit" financing --
credit lines for various pur-
poses, related, to your total
credit needs, and based on
your ability to, repay. In, many
cases, it's a more efficient,
lets costly 'use of credit.
CASH FLOW - It's a way
to forecast your cash position
each month or, quarter, es-
tablish your cash needs, .plan
for yemt-credit requirements.
ABILITY -TO REPAY
Your schedule for, repaying
loans should be closely
ned with the: projected in-
come from your farm; if this
isn't done, there could be a
in order to compare owner-
ship with leasing. or custom
hiring.
LEVERAGE - It involves
risk -- but it also can increase
your net return; it means
substantial credit is used,
along with your own capital,
to try to increase the ,net,
return on totals capitalinvest-
ed. To make it work, you
must •be sure youi farm can
yield a return on capital
greater than the cost of bor-
rowed money.'
LAND VALUE - What's a
property'worth? If you're
buying farm land, you will
want to relate the price to
future productive value.
There's a way to estimate
this value, by formula, using
projected product price figur-
es, production levels and
costs.
FINANCING A LAND
PURCHASE - Rates and.
terms .vary considerably ani
ong the growing number. of
Mortgage lenders. The op-
tions are.:_w_nraLs_tuily_i_g,_1,1 so
that your farm's repayment
caRcity matchis the requir-
ed debt repayMents.
Although Certain details of.
winters and Contractcors!
Don't be cau ghtgaing a without Power
Purchase A
Midwest pale top switches
For all your electrical needs
Commercial - Industrial Resi4ntial
Generac
Alternator
Gas driven to PTO models
Try Allis-Chalmers
Master Lease
• Backhoeing
* Bulldozing
• Trenching
• Trucking
Sand and Gravel
available on new equipment
'Conserve your credit line for income producing outlays of capital
*Plan a systematic equipment replacement program, some tax benefits
may be available to you
Hackett Farm Equipment features a full line of new farm equipment
Stop in and see farm implements manufactured by Allis Chalmers,
Hesston, Owatonna, Versatile, and Others