Tips to help get you out of financial trouble and improve your mental health
Tuesday, October 25, 2022
by: By Art Lange, Grainews August 23, 2022

Section: Wills, Estates, Wealth Transfer

Mental health among farm families is much written and talked about in the media
these days — and rightly so. Over the last
couple of years, western Canadian farmers have
been hit by record-setting droughts and other
hardships while they cope with the lingering effects
of the pandemic.
In Alberta, there was an excess of moisture in
many areas in 2020, which lead to late or no seeding,
and what finally grew produced poor yields. In 2021,
there was drought in much of Western Canada,
which, once again, led to greatly reduced yields. Fortunately,
commodity prices increased significantly
that year. However, the net result was a break-even
situation for many. As one farmer told me, “Half of
the crop at double the price is the same as a normal
yield at the normal price.”
Now, in 2022, we have rampant inflation with
seed and fertilizer prices and fuel and crop insurance
premiums, the main inputs in a grain operation. All
of this on top of COVID-19 — it really can affect
one’s mental health.
As a result of these and other factors, some farmers
are finding themselves in financial difficulty.
Pressure like this often causes mental stress, which
can permeate the whole family, and then everyone
suffers. As a farm business consultant for 18 years, I
have helped farmers deal with financial distress situations
many times, and I have some ideas that may
The first thing I recommend is to analyze your
overall financial situation. That starts with preparing
a net worth statement as of the farm’s last fiscal
year-end. To do this, list all assets (at fair market
values) and all liabilities. The difference is your net
worth. If you have 75 per cent or higher net worth
you should be in reasonable financial shape. On the
other hand, if you are down around 50 per cent (or
lower) you are probably in financial difficulty.
Next, look at your income and expenses over the
last five years. This will show you what the income
trend is for your farm. Combining these two factors
will tell you if there is a financial issue and how serious
it is.
Next, discuss with your family/team what your
personal and business goals are for the short term
(one to five years) and long term (five to 10 years).
Take the above financial situation and your goals and
see if there is any way to combine the two. If there is
a financial problem, there are basically three ways to
deal with it, alone or in combination:
• Sell assets to reduce debt load
• Off-farm employment
• Restructure debt
On many farms, there can be an excessive amount of
machinery, some of which I call toys (specifically,
items that are not absolutely necessary). My rule of
thumb is if you haven’t used it in the past two years,
why do you need it? Remember, machinery is a
depreciating asset. The more you can reduce unnecessary
equipment, the better off you will be. For
smaller farms, I suggest sharing equipment or getting
the work done by a custom operator, so you
won’t need a seeder, sprayer or combine.
If selling excess machinery doesn’t solve your
debt load problem, you may have to consider selling
some land. This is not a popular suggestion but is
the logical next step. I’ve had some cases where I’ve
recommended clients sell one or more quarters and
then rent them back, so the productive value of the
land is retained. A couple of times, we were even able
to include a buy-back clause in the sales agreement,
whereby the seller had first option to buy the land
back at an agreed price within five years.
Depending on the location of your farm, its size and
your time availability this may or may not be possible.
Some grain farmers have time over the winter
when they can work off of the farm.
This is usually done in conjunction with selling
assets to reduce debt load. This can be achieved by
taking some or even all of your total debt (current,
intermediate and long term) and amortize it over a
longer period of time. This allows you to reduce your
cash flow requirements to meet your income stream.
Some other suggestions for managing debt
include the following:
 Try to keep current with all of your payables. If you
fall behind with your loan payments, it adversely
affects your credit score. It also makes for difficult
relations with your lenders or can make it harder to
find new ones.
 At the very least, always try to make the minimum
monthly payments on your credit cards. Failing to do
so will, again, cause your credit score to suffer.
 Be open with your creditors. If you have financial
challenges, discuss the situation with them, sooner
rather than later. Hopefully they will work with you
to make some adjustments to your payment schedules.
 Sometimes the financial situation has deteriorated
so much your existing lender will not work with you.
Then it’s time to find a new one. However, before you
do that, prepare a business plan that outlines your
situation and how you intend to work through it
using some of the above tools. Also, it’s helpful to
include a section on how you plan to avoid your
present predicament in the future. Once you have a
business plan, present it to all of the lenders you
know of, you never know who will bite. If you can’t
find a new, conventional lender and want to continue
farming, an equity lender may be an option. These
types of lenders typically have higher interest rates
and higher application fees but are usually willing to
work with farmers if they have adequate equity.
 Bankers like business ratios, so it’s important to try
to include those in your business plan (specifically,
before and after scenarios). The debt servicing ratio
is an important one. Alberta Agriculture, Forestry
and Rural Economic Development has a program
called Agricultural Business Analyzer to help farmers
calculate business ratios, which can be found at
I hope by exploring these suggestions you can see
that it is possible to work through financial challenges.
It’s better to start sooner rather than later. If
you must find a new lender, it can take from six
weeks to six months to get it all arranged. The farmers
I have worked with who have participated in this
exercise say they have experienced an immense
reduction in mental stress and family life has also
greatly improved. GN
Art Lange, PAg, CAFA, is a farm
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