There comes a time in farm operations when the conversation to expand or diversify the business comes up. The inevitable questions commonly include how, when and, most importantly, why?
But what does a farm CEO need to consider before answering these questions? Asking an advisor like Mark Verwey, BDO’s partner and national agriculture leader in Portage la Prairie, Man., would be a good start. He’s been advising farm clients for more than 25 years on everything from estate and succession planning to tax planning and wealth management.
Involve your financial institution
From Verwey’s perspective, one of the first considerations is to have your financial house in order, since a growth or diversification phase is often a capital-intensive proposition.
“It’s important to meet with your financial institution well in advance of any decision, to try and arrange pre-authorized financing,” he says. “This will allow you to move quickly should an opportunity arise.”
A lender will examine the strength of your operation before approving additional financing, so be prepared to talk about three ratios: debt-to-equity, debt-servicing and working capital.
Source : FCC