Fixing Liquidity

Fixing Liquidity: Where did we go wrong?

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Fixing Liquidity

Fixed Costs vs. Variable Costs

Many banks tell you to just term out cash loses onto a 5 or 10 year note to make your operation liquid again.

I hate this advice. It is my last resort suggestion after we have exhausted all other options. It is a good decision for the bank if they are well collateralized. It is the easy (easy at first, but a very dangerous action) way out for you and doesn’t fix any real problems.

Consider this: If your cash is gone, that probably means either:

A) Your cash flow has been negative for some time.

B) You have a spending problem.

C) You have structured debt poorly in the past.

D) You aren’t a very efficient operator and aren’t paying attention to your numbers.

E) You have had an extremely unlucky stretch of circumstances which impacted not only your crop production and commodity prices, but family has been involved with the unlucky stretch as well.

(Most people will put themselves in E, but that typically only applies to families with an expensive, unexpected medical condition. So, if you said you are E and didn’t have medical expenses, you are probably a D.)

Why So Dangerous?

Why is it so dangerous to term out operating losses?

When you term out an operating loss, you’re essentially converting short-term pain into long-term burden. Operating losses — or a lack of liquidity — mean your operation hasn't been profitable, often not just last year but for several years. That’s a serious warning sign.

Pushing those losses into term debt doesn’t fix the root problem. It only delays it — and makes it worse. You’re taking an unprofitable business and adding long-term principal and interest payments on top of the problem. Expenses go up, not down. Profitability gets squeezed even further.

Now, instead of focusing on rebuilding, you’re saddled with the task of covering both future operating needs and past failures. That’s a recipe for accelerating losses. The hole gets deeper, faster.

You’re not just buying time — you’re mortgaging your future to pay for past mistakes.

Fixing Liquidity

If you’re dealing with a liquidity crunch, terming it out isn’t a solution — it’s a symptom. The real solution is to make operational changes immediately. Fixing liquidity starts with decisive action. Here’s where to focus:

• Cut spending hard or find ways to increase income fast. Be ruthless and honest about what's essential.

• Sell underperforming or non-core assets and consider using proceeds to pay down term debt. Freeing up cash flow gives you room to breathe.

• Restructure debt if your payments are out of alignment with cash flow. Poor debt structure can choke an otherwise viable operation.

• Know your numbers. Track cash flow monthly. Don’t fly blind.

• Get help. If you’re overwhelmed or unsure where to start, find someone who knows farm finance and can guide you. Fast action now beats perfect planning later.

I will help guide you through this with Cash Flow content all June. Plus, a Cash Flow Masterclass will be offered this month to improve YOUR FARM’S Cash Flow. To be notified when this is available, sign-up here: Grow Your Farm | Farm640

Bottom line 

You can’t borrow your way out of an unprofitable operation. You have to operate your way out — with better decisions, tighter discipline, and a commitment to change.

Need help with your operation's financials?

I have limited spots available for 1-hour consultations helping you:

• Understand your farm's financial position.

• Prepare for future growth opportunities.

• Discuss purchase & finance options on farm transactions you are working through now.

Sign-up here if my services can benefit your operation:

https://calendly.com/grant-farm640/60min

Have a great week!

Grant