Many production farmers need to borrow for liquidity. It provides flexibility and opportunity. But, at what cost?
Farmers need the flexibility of available cash for inputs, repairs or other farm needs. Also, ready cash can be valuable when the opportunity arises to purchase equipment or even land when time is of the essence.
But, what will you pay for that cash availability? Most farmers borrow operating money at a variable rate tied to the prime rate. Often, that rate is above prime rate – perhaps 1%, 2% or even more above the prime rate.
AGRIfinancial Services offers the Ag Equity loan for liquidity. The loan rate is tied to the 1-month libor rate. Currently, the Ag Equity rate is pegged about 2% above the libor rate.
But, what is more important is that a loan rate at libor + 2% is consistently far below a common loan rate of prime rate + 1%, as shown below.
As you can see, borrowing at libor +2% has almost always been a far better rate than borrowing at prime + 1%. Today, that difference is about 2 full percentage points – 4.25% vs. 2.25%.
So, by using the Ag Equity loan product for your liquidity you can save a lot of money. Two percentage points per year on your borrowing can make a real difference.