HomeMy WebLinkAboutThe Wingham Advance-Times, 1985-03-20, Page 39Creative techniques
By Randy Threadyle
Farmers facing frnaneial decisions in tough.
economic tames were offered some advice at a
farm seminar in Hanover.
Stephen Barker, a Hanover lawyer, said
negotiations between fanners and lenders
may be the key to solving many farm financial
problems.
He said in many cases, the legal system
alone is too rigid to deal with the massive
defaults in the agricu Lural sector: The legal
system is based on a winner take all
philosophy and this often inhibits negotiation.
Barker suggested some creative financial
techniques such as interest holidays, reduc-
tion of interest rates, writing down accrued
interest..and in some cases writing off some
debts, as ways of solving problems. The
lender has a legitimate right to be paid, but
the fanner also has a "legitimate right" to
stay on his farm Balancing those two sights
is the key to negotiations, he said.
Farmers who wish to renegotiate loans
should be prepared to give the lender more
than they receive in bankruptcy.
"Lenders are very reluctant to take a loss
and leave the farmer in possession. It really
sticks in their craw to let this guy stay on the
land when the bank is taking a loss," he said.
Another speaker at the seminar, Lindsay
Barfoot, a manager of the Agri -Food Group of
Price -Waterhouse and Association of Toronto
warned farmers that due to the number of
farmers in financial difficulty there will
probably be many nervous farm lenders.
Barfoot said in the future, lenders might
have a tendancy to "err on the conservative
side where they previously erred on the
liberal side" when assessing farm loans.
He said farmers who have learned to cut
costs will be the ones who stay in business. •
Barfoot suggested that farmers could not
expect a lot of "new' help from govern-
ments, due to large government deficits.
He said farmers should see their lawyer, or
accountant before making a deal. Most fauns
are large businesses and require competent
legal and accounting advice. "But their
advice must be considered in light of your
wishes and circumstances. Don't rely blindly
on experts," he said.
Shared risk loans
'Farmers who borrow from the Farm Credit
Corporation will have the option of choosing,
new six year "shared risk" loans starting
April 1, federal Agricultural Minister John
Wise announced recently.
Speaking at the Westem Ontario "'Farm
Show in London March 8, Wise said the new
loan option would spread the risk of rising
and falling interest rates between the
borrowers and the corporation.
The shared risk aspect would mean if
interest rates rose by two percentage points,
the borrower's rate would go up only half of
that. If rates were to go down, half of the
decease would be absorbed by, the corpora-
tion and half by the borrower.
Wise said `the interest rate adjustments
would be made' once each year and farmers
also would receive the protection of a 2.5
percentage point ceiling on interest rate
increases on their shared risk loans. Any
increases'above2.S'points'would be absorbed
by the Farm Credit Corp.
"Innovative progarrrs such as the shared
risk program will give FCC borrowers greater
financial flexibility and protection," he said.
Demand for loans from the corporation has
been falling steadily for the past few years,
largely because of the poor farm economy and
low commodity prices.
The corporation, which .exists to give
Zum to page 8
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