Level four sees loan refinancing to defer principal payments so that other bills can be paid-mortgaging the future, in other words. Money for family living is restricted, even if non-farm income is available. At whatever level I find them, I try to help them understand what their level of profit is, and what it would take to move to a higher level. Just as important, I help them understand that the lower the level, the less likely they are to successfully continue to farm for long. At level three there is not enough money to pay even the restructured principal payments although the family severely restricts personal expenses to pay essential current business expenses.
Unpaid bills accumulate, equity is declining very rapidly while debt increases with equal speed.
At level two, there isn't enough money to pay all current business or other expenses despite non-farm income and loan restructuring. The farther down the numerical sequence of levels, the faster one goes in the wrong direction. Financial analysis, Kreigl concludes, can help farm families understand the price they pay for the choices they make. Visit our Contact Us page.