Strengthen balance sheet
Many farmers are constantly looking for ways to improve their financial standing. Whether that means gaining access to capital, reducing debt or improving their cash flows - a sale-leaseback can help in many ways. The capital gained from the sale can be put to work in the operation to assist with operating costs, build infrastructure or help to pay off current loans.
Improve cash flow
A sale-leaseback can help to lower debt payments and gives the farmer the ability to reinvest money back into the operation. This can help increase the efficiency of the operation and even put the farmer in a better position to expand their land base. Sale-leasebacks can enable more financial freedom and can improve the profit margins for the operations.
Sale-leasebacks can help reduce risk while still allowing those who are planning for retirement to continue farming the land. The capital gained from selling land can be put into the bank and set aside for retirement down the road. Transferring the land into new ownership will help to simplify the process of dispersing farm land and assets while limiting stress when the transition to retirement happens.
Being proactive about planning your retirement and succession plan helps to create a smooth transition when the time comes. Many young farmers do not have the means or capital to purchase land up front from their parents or grandparents. A sale-leaseback helps to give that young farmer access to operate the land, while also giving the parent/grandparent the means to finance their retirement. Putting an option-to-purchase in place can allow the young farmer to potentially acquire the land at a later point in time, creating the opportunity to keep the land in the family for the future.
Maintain long-term control
Many farmers currently lease land from neighbors that may be nearing retirement; this puts the farmer in a situation where they are unsure of the access to the land in the future. With a sale-leaseback, an investor can purchase the land from the former owner-operator and the farmer can continue to lease the land, this time from the investor. With a long-term lease in place, this guarantees the farmer has access and control over the land for years to come.
Expand farm operations
When a farmer wants to expand their current operation, but isn’t positioned financially to buy the land themselves, a sale-leaseback may be the best option. A farmer can identify the land they are interested in, then work with an investor to create a 3-5 year lease term giving the farmer access to the land, without having to put up the capital to purchase. Many in this situation choose to add in an option-to-purchase, which can give the farmer the capability to own the land if they come across the capital in the future.
Interested in doing a sale-leaseback? Apply today to get started.