Chris Barron: Opportunities During Black Swan Events

In times of difficulty, it’s critical to stay focused on what you can control and try to ignore outside noise. ( AgWeb )

Every so often an event occurs that is completely unpredictable – and totally out of our control. The coronavirus (COVID-19) has been the absolute definition of a black swan event. 

This situation has crushed markets, created massive volatility and caused a tremendous amount of fear in every industry across the globe. What does all this mean for the future of your farming operation? 

Few, if any, operations have any kind of business contingency plans to can accommodate the level of potential economic problems we may be dealing with in the foreseeable future. Commodity prices appear to be the primary threat to cash flow and farm financial stability. 

Plan, Don’t Panic

In times of difficulty, it’s critical to stay focused on what you can control and try to ignore the outside noise that could distract you from making deliberate and effective business decisions. Stressful economic periods often present tremendous business opportunities. 

As we move through the remainder of this year your biggest opportunity for future business growth may directly be correlated to restructuring and refinancing your debt. Here are three primary components to consider in this process.

  1. Interest Rate Reduction: This opportunity is directly correlated to your ability to illustrate the quality of your operation as a borrower. Is your debt repayment capacity clearly reliable and structured with sufficient collateral? Detailed information such as cash flow projections, comprehensive multi-year trend analysis, accurate market value balance sheet details and a documented written business plan has a direct impact on the lenders willingness to lower rates. 
  2. Debt Restructure: Consolidating short and intermediate debt into a longer-term payment schedule can allow your business some additional financial flexibility and risk tolerance. By stretching your payments out over a longer-term and lowering debt repayment requirements, your working capital can improve and be used as the business environment changes along the way. Just because payment schedules are lowered annually doesn’t mean you can’t pay the debt off quicker; however, in the current environment a stronger working capital position may be important especially in the near future.
  3. Comparative Analysis: Always look for additional lender perspectives when analyzing your interest rates and/or restructuring debt. When you have your financial information assembled for your current lender it’s time to duplicate that information and present it to one or two other lenders for a second/third opinion. You may not change to a different lender, but it allows you to do your due diligence and reassure yourself you have thought through the best debt structure and financial planning for the future of your operation. 

Through proactive planning, we will survive through this and be stronger in the end because of it. 

To listen to a podcast with Chris on how to maneuver your financial opportunities during the coronavirus pandemic, visit AgWeb.com/barron-covid-19

Follow comprehensive COVID-19 and agriculture coverage at AgWeb.com/coronavirus.


Chris Barron is director of operations and president of Carson and Barron Farms in Rowley, Iowa. He is also a national financial consultant for Ag View Solutions.

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