Unlock yourself from the shackles of merchant credit
Availing of merchant credit to solve one problem can just create more for you to deal with.
Improved cash flow. Flexible repayment terms. On the face of it, merchant (or trade) credit seems like a great idea, freeing you from the stress of paying up front for the vital inputs and supplies you need to keep your farm running. This lets you concentrate all your focus on the real work at hand, but problems can arise if you allow those merchant credit bills to build up.
What merchant credit might be costing you
In financial terms, merchant credit will chip away at your profits and, potentially, the growth of your farming business with:
Higher prices charged for goods compared to when you pay up front
Interest charges that can snowball over time
Reduced negotiating power for future purchases
Limited supplier flexibility with you tied into existing arrangements
The good news is that some structured planning and key strategies could release you from your reliance on merchant credit and set you on a more sustainable financial footing.
First you need to create a Debt Reduction Plan
Take stock of all your merchant credit accounts. What are your:
Outstanding balances
Interest rates being charged on each of them
Payment terms (e.g., 30, 60, or 90 days)
Critical due dates (e.g., year-end or post-harvest deadlines)
Track every purchase and payment you make
It’s vital you account for each and every transaction. Keep on top of all your merchant statements and make sure the costs paid align with prices agreed. Updating your cash flow forecasts will paint a clear and accurate picture of your financial position, while monthly financial reviews will enable you to monitor spending and identify areas for improvement.
Explore lower-interest options to reduce costs
You know, merchant credit isn’t your only choice. There are various loans available on the market to help you finance your farm. These include Cultivate Loans from the Credit Union, Farmer Credit Line from AIB, Stocking Loan from Bank of Ireland, o Term Loan from PTSB or MilkFlex Loan from Finance Ireland These each come with different terms and interest rates, so be sure to speak to your bank to see if the loan options they offer are a viable option for you.
Plan your purchases strategically
Making big expenditures in line with your income cycles improves cash flow management. During profitable periods, focus on building cash reserves to provide a financial cushion for future needs. Exploring c-op or merchant buying opportunities or rebates could let you take advantage of bulk discounts and bring down overall costs.
This is a marathon, not a sprint
Turning your business into one that is sustainable and resilient means strengthening working capital and fostering financial discipline. You should focus on building an emergency fund to cover unexpected expenses and establish a line of credit with your bank to provide added flexibility. Exploring off-farm income opportunities can supplement cash flow during quieter periods.
By keeping detailed financial records, you can track your progress and set realistic goals. Engaging with farming discussion groups can provide valuable insights and strategies here. This is about starting small and staying consistent.
Discipline is the key to unlocking yourself from merchant credit
Even during challenging seasons, this will be about staying the course. Setting manageable goals, charting financial progress, and examining all your options will gradually put you more in control of your finances, your farm, and most importantly, your future.