What do you think?
If assets were your answer then you are thinking like the majority of farmers. You know assets are very important and they are needed as collateral for that bank loan. However, I want you to sit back and think, if you don’t have cash flow how are you even going to pay for that bank loan? You aren’t.
Watch this short video and I’ll tell you why in one minute!
[tcb-script src=”//fast.wistia.com/embed/medias/bpvc6egrwz.jsonp” async=””][/tcb-script][tcb-script src=”//fast.wistia.com/assets/external/E-v1.js” async=””][/tcb-script]Having cash flow is more important than having assets. You can use your assets as collateral but if you don’t have the cash flow the bank won’t lend you money because they know you can’t pay them back.
With that being said, which way do you want the cash to flow, away from your operation or into your operation?
Don’t be so quick to laugh at that question and say the answer is obvious. If you are buying things to avoid taxes and creating a debt to do so, what did you just do?You just created cash flowing OUT of your operation yet you may have been thinking cash flowing into your operation was the obvious answer. Making a purchase you need is one thing, making a purchase and creating cash flow OUT of your operation for years is another.
I have talked to hundreds of farmers in the last year and it has come to my attention those who have money in this down market are those who have not created loans where cash is flowing out of their operation. Instead, when times were good they paid their taxes and today when cash is limited that cash is flowing in rather than out as payments for equipment.
When cash leaves your account it makes someone else wealthy. Start making your operation wealthy and think about that next purchase in the form of cash flow. Once you have cash flowing into your operation you are going to need a place to warehouse that wealth and you will find the perfect tool inside the book, Farming Without the Bank.
Will you be working toward cash flow positive this year?