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Farmers Sell Future Government Payments For 'Cash Up
"What the farmer is going to do with the money determines whether or not getting the present value is advantageous," Walskog says. "If it allows him to earn more money in the future, then it's a good deal. If the producer is going to pay off a loan at 6 percent interest, then it's probably not a wise decision." Wallskog says there are no upfront charges or fees to the farmer. Then only obligation is to continue to maintain compliance to ensure the payments are not disrupted. What If I Have A Lease? Farmers who hold a lease also can sell their payments as long as their lease is not year-to-year. "We can't purchase payments based on a year-to-year lease because the payment isn't assigned through the FSA office until the following year," Walskog explains. "We can't buy something that hasn't been assigned to the person renting the land. However, most farmers don't seem to have any problem securing a three-year lease or an extended long-term lease through the year 2002. "If the farmer and the landlord are each taking a percentage of the payment, we can work with the percentage that the lease farmer has." A Farmer's Perspective 'Edgar Bearce of Marlow, Okla., has been farming cotton, soybeans, wheat and milo for the past 37 years. He has seen interest rates on borrowed money climb as high as 18 percent and experienced the uncertainty surrounding farm programs. "There's always the possibility that the programs will be reduced or go away all together," Bearce says. "A lot of people believe farmers should not be entitled to these payments. I wanted to have the money now instead of worrying about whether it would still be available in the future. What if the government decides not to pay as the contract states? "The farmer is not required to make up any shortfall in payments due to government reduction," according to Wallskog. Do You Homework Before deciding to "cash out," put the pencil to the offer. If you can improve the profability of your operation and handle the additional taxes by taking a discounted lump sum now, you may want to consider this option. If you are comfortable with your cash flow and have no plans for improvements or future land purchases, you may want to stick with the yearly payments. For more information on selling future government farm payments, contact Heartland Capital Funding Inc. at 1-800-897-9825. Bottom Line If a farmer receives at least $7,500 per year in PFC payments or $4,000 in CRP payments, he can assign a portion of the minimum amount of that estimated payment range to Heartland Capital Funding in exchange for up-front cash. |
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