The Rural Voice, 1992-01, Page 27THE NUMBERS
equipment that seriously needs to be
replaced, but I'm going to replace it
with used — and it may take all winter
to find the right price, or I'll still be
using what I've got."
For a change of scenery, I headed
over to Jim and Beth Cooper's. I've
always considered them to be a pretty
astute couple with a sharp pencil.
Surely here was a pair ready to take
advantage of 10 per cent FCC money,
4.9 per cent dealer financing and 10
per cent bank funding.
But according to Jim, "Nothing is a
good deal if you don't need it." His
advice was: "Don't make yourself
machinery -poor; all equipment does is
depreciate."
What about taking on
more land, since
long-term financing
is at an all-time low?
"Sure, long-term interest rates are
low," he admitted, "but will the land
cash flow at present prices and at
average, normal yields? Will the
down payment leave you cash -starved,
requiring you to borrow all the
necessary operating capital?"
On the threshold of 1992, having
survived the '80s still in one piece,
what was the Coopers' plan now?
"To still maintain disciplined
spending," said Beth. "Spending what
you don't have on personal enjoyment
will not bring long-term satisfaction."
As I left their place, I noticed a
framed mono on Jim's desk: "You
must have a goal and a plan with
moderate speed, good management
and always be diversified to lessen
overall risk."
That must be out of date, I mused
as I drove down the lane. In ag school,
I was taught to specialize, get all your
eggs in one basket, big means
efficient... I wonder what school Jim
went to?
It was time to talk with a banker,
someone with lots of ag experience.
David Lichty is Milverton branch
manager for the Mennonite Savings
and Credit Union. I knew David had
spent 13 years with FCC in Oxford
county and was now operating in solid
ag country.
David said that 60 per cent of his
branch's loans are farm loans, and 30
per cent of all Mennonite Credit
Union loans are farm loans. While
loans were up 12 per cent for the first
ten months of 1991, he pointed out
that,
"This is not some magical,
corporate money machine here:
it's your neighbours' money
you're borrowing;
it's your neighbours' money
we're lending out.
"We are not promoting lendings,"
he added, "and there are no interest
rate sales. As well as lend money, we
also emphasize savings and fiscal
stewardship."
Asked whether now might be a
good time to borrow, David's reply
came in question form. "What's it
for? Does it make sense? Can you
pay it back? You must be able to
service your debt, while not crippling
your operation and draining available
cash." Those three questions still
apply, he said, no matter how low
interest rates may go.
For another financial expert's
opinion, I spoke with my accountant,
Glenn Hayter. His first question was,
"Can you repay it?
It doesn't matter
if the interest rate
is 2 per cent or 22 per cent —
it's got to cash flow."
Glenn's advice was to lock up
interest rates now. Rates may be a
half -per cent from the bottom, but
don't wait: if you can live with it,
lock up the interest rate now.
On the topic of purchasing land at
current prices, Glenn stated: "If it
takes all your surplus cash just to meet
the down payment so that you have to
borrow all of your operating capital
and take out term loans for equipment
purchases, then you won't last long,
GRIP or no GRIP."
In his opinion, "We may have to
get back to financing farms the way
we did before the mid-70s: a vendor
mortgage with reasonable down
payment at, say, 9 per cent. It's a
good deal for the buyer and a good
deal for the seller." He is convinced
that those who made it through the
depressionary '80s will be cautious
buyers and borrowers.
As for me, I came away with a new
appreciation for my neighbours, who
seem more inclined to help their
neighbour out than buy their
neighbour out.0
JANUARY 1992 23