Ten ways to turn farm debt into farm profit – Hint No 5 monitor the loan

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Once your loan has been received, monitor every change in the debt yourself. You need to know at least as early as the bank does, what is happening with your debt. Otherwise you can find yourself paying penalty interest rates instead of what you thought you were paying. It also means you know how much you would need to refinance if the relationship with your lender collapsed.

Prepare an excel spreadsheet to record repayments and residual debt levels.

Columns could be:

Transaction date; opening balance; add interest charged since last entry; less repayment made since last entry;  new closing balance ( becomes opening balance for next transaction date).

Transactions would be entered whenever repayments are made – weekly, fortnightly, monthly, quarterly, annually Etc

By doing that you will always know how much debt is left, what interest is being charged and whether payments are up to date. That is a lot better than you relying on the bank to record the details correctly and thus the bank being the only one to know how your loan is progressing.

If problems arise, contact the bank quickly and explain what caused them. It is very easy for a flood or fire to bring cashflow to a halt or even drain bank balances.

Ask for an extension of time. Even when you are given an extension, if you use it many banks will still treat that as a default that they can use against you later. It is not a problem but it is good for you to know.

If there are serious difficulties with repayments or friction with the bank, call in a consultant like GBAC to manage the situation for you. Consultants do that all the time and are therefore more familiar with what will be acceptable to the bank and what other options you have, like refinance with another bank.

Major problems with the bank can cost a heap of money and destroy the profitability of your loan. They can also take up masses of time again diverting borrowers from profit-making. By delivering you extra profits as well as a capital asset, your debt will be making all the effort worthwhile.

Any borrower not earning profits is probably making losses. Don’t let anyone tell you “they are just paper losses”. There is no such thing. That I know after  years of consulting and accounting.

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