Ep. 322 - Why Liquidity Beats Paying Off Debt

Cattle checks look big with the current cattle prices, so why are so many farmers and ranchers still getting squeezed by the bank with farm loans?

Because paying everything off kills your liquidity and hands control back to the lender. Let's fix that. 

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👉 Get the book: 
https://www.farmingwithoutthebank.com/book/

Here's a look into the complexities of farm finance and why banks often limit farmers to three years of operating debt.

Understanding debt management is critical for farmers navigating the current agricultural finance landscape. This video offers insights for farmers seeking to improve their farm management practices.

In this episode, Mary Jo breaks down how to utilize money (not just spend or "pay it off") so you keep control through tough years.

We walk through real-world ranch scenarios: a $100k calf check, 9% side-by-side loans, operating at 9%, banks dragging their feet on bull purchases, and the hard line many banks draw after three years of termed-out operating.

You'll learn why keeping cash liquid can beat extra principal payments, when fixed rates make sense, and how "one pool of money" thinking (including infinite banking) helps you plan for 3–4 lean years without hitting the panic button.

🔑 Key Takeaways:

• Liquidity outweighs extra principal: don't pay off notes if it forces you back to a 9% operating line. 
• "One pool of money" mindset: location of dollars matters less than control of dollars. 
• Operating notes often carry the highest rate and the tightest terms—prioritize flexibility. 
• Many banks tolerate only about 3 years of termed-out operating before pushing hard measures. 
• Consider fixed-rate land notes for peace of mind; you can always refinance if rates drop. 
• If ROI is more than the loan rate (e.g., competent sell-buy cattle marketing at 25–35%), keep the debt and deploy cash. 
• Plan in 3–4 year cycles; align payments, operating needs, and cash-in from calf sales. 

Chapters:
00:00 The 3-year "term-out" cliff on operating notes
01:01 Welcome + today's topic: how to utilize money
01:38 Cash flow obsession (for good reason)
01:51 Cattle guys have cash, now what?
02:23 The urge to pay everything off (and why it backfires)
03:53 Banker delays & why liquidity beats permission
04:32 Rates at 6–9%: what to actually pay
05:11 The $100k calf check example (don't give it all to the bank)
06:05 Keep cash for operating; borrow less later
07:11 9% side-by-side vs 9% LOC: same rate, different control
08:08 "One pool of money," explained
09:26 Operating on cash vs buying land—hidden 9% cost
10:19 Think in 4–5 year plans, not one-off payments
11:09 Operating notes = highest strain + annual payoff pressure
11:31 Most banks won't term out operating beyond ~3 years
12:37 Year three decision point: quit or keep going?
13:05 What to pay (and what not to overpay)
14:00 ROI greater than 9%? Then don't rush to pay off
14:53 Fixed vs variable: lock it in and sleep at night
16:28 Lessons learned: moving from variable to fixed
17:01 Infinite banking = using money correctly
17:32 "I found your premium": funding policies by re-routing cash
18:09 How to work with me + next steps

(Timestamps are from the video version. Audio-only edits are always shorter since they have had more fluff removed, so the timestamps are not accurate to this version.)

👉 Grab the book, then schedule your strategy session to map your 3–4 year liquidity plan and stop letting the bank run your ranch.

Book:
https://www.farmingwithoutthebank.com/book/

Read the book, then schedule a call: https://www.farmingwithoutthebank.com/contact/

Email Mary Jo: maryjo@withoutthebank.com

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