Agricultural Economics Department
Date of this Version
11-11-2024
Document Type
Article
Citation
Groskopf, J. “Avoid Year-End Operating Loan Pitfalls” CAP Series 24-1101, Center for Agricultural Profitability, University of Nebraska-Lincoln, Nov. 11, 2024. DOI: 10.32873/unl.dc.cap052.
Abstract
As the year draws to a close, many producers rely on operating loans, or lines of credit, to finance essential expenses when cash flow is tight. These loans function like credit cards but usually come with lower interest rates. An operating loan is a short-term financing tool — often lasting less than a year — designed to help manage business cash flow. Borrowers are usually granted a pre-set limit they can draw from and repay multiple times throughout the year, primarily for purchasing inputs rather than long-term assets like land or equipment.
However, as the year ends, it's crucial to navigate the potential pitfalls associated with these loans. Here are some key considerations to keep in mind.