Focus Management Group’s broad industry experience is second to none. During this series, we will discuss various industries or industry sectors we are involved with, and how our approach offers solutions to borrowers and lenders experiencing stress.
This article takes a look into the Agriculture sector, but more specifically, Crop Farming. Whether a farmer is growing potatoes, corn, beets, soybeans, rice, or any other crop, Focus Management Group is uniquely qualified to assist during challenging times.
Types of Assistance
FMG has worked with farmers to analyze their cash flow, specifically identifying crop year and calendar year financial performance. Most software systems available to producers can be set up to easily provide this data going forward, and we are able to work with farmers to develop historic data into crop year and calendar year performance data, as well as to ensure future periods are presented in this manner.
FMG also focuses on breakeven production costs, utilizing a matrix analysis of input costs, yields, and sale price scenarios, we are able to assist the producer in evaluating how best to forecast financial performance and cash flow. This allows a farmer to maximize the opportunities to achieve or exceed the breakeven point.
Financial performance by farm is an important component of any financial performance analysis for a crop farmer. If yield and costs per farm are not currently available, we are able to work with the producer to set up that tracking in their existing systems. Even when yield and costs per farm are not available for prior periods, we are able to work with existing data systems to identify financial performance for owned acreage versus financial performance for leased or rented acreage.
Working with farmers to analyze their financial performance in different ways helps all parties understand the risks and rewards that could be achieved during the next crop year.
An example
During the last crop year we were able to work with a crop farmer to organize their confusing financial information into a reliable cash flow model and financial performance model. That allowed the farmer to know how much financing they required for the current crop year and how the cash from previous crop years would flow in to support the current crop. Understanding those cash flows was key for creating a game plan with the lender to make sure the farmer had enough availability and the lender and farmer had regular financial performance data to test against the forecast.
As is often the case, this farmer had multiple legal entities and a combined cash management process. FMG was able to clarify the assets for each entity and the costs incurred by entity. That clarification provided the insight the lender required into the financial performance of each entity as well as the financial performance overall.
The combination of better cash flow modeling, tracking of financial performance, and clarity into the assets and cash flows allowed the farmer and the lender to determine a go forward plan for the current crop year.
The lender asked the farmer to find a new lender, and as a result of the groundwork in analysis FMG prepared, new lenders were able to see the opportunity being presented and the farmer was able to successfully refinance. If the cash flow, financial performance and clarity of entities had not been developed for the current crop year, it would have been much more difficult to find a replacement lender.
This crop year
As we are moving into a new crop year, lenders and farmers need to consider working capital needs for this year. FMG is ready to help farmers, and their lenders, develop strategies to move through this crop year and better position themselves for next year.