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East Central SD | It just seems as though every operation I've seen go broke (all from a distant - never been close to an operation that went broke) seemed to be carrying a lot of machinery or livestock debt. Other than observation, the thing about int. debt right now is how terribly tax inefficient that debt is. What I mean by that is you can write off the purchase price of a $100,000 tractor today to minimize taxes but you will need after tax income to pay for that tractor over the next 3-5 years if it is financed. Always match the deduction with the payment. Also, I don't necessarily consider equipment "productive assets". Other than that I don't know how to explain it. I just don't feel comfortable financially when borrowing to buy machinery. If a purchase can't be pulled out of my working capital I don't feel comfortable making the purchase. It just seems as though once you put yourself in that cycle it is extremely hard to get out of. It may be fine for a long time (like the last 20 yrs) but all it would take is a couple of tough years and you would still have your payments to make. I would just have to be disciplined enough to not make any new purchases.
Scott | |
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Rich dad poor dad or dave ramsey?
