By the third year of an expansion project, your cash debt repayment capacity should be at 130 or more.
That’s one of the thumb-rules that Steve Bodart used while serving as a dairy business specialist for Land O’Lakes. After more than 12 years in that role, Bodart recently went to work as manager in charge of finance and personnel management at a 1,100-cow dairy in Emerald, Wis.
Cash debt repayment capacity refers to how much money is left over, after farm operating expenses and family living expenses, to pay down long-term debt, including principal and interest. A repayment capacity of 130 means there is $1.30 available to pay each $1 of debt service during the year.
Financial benchmarks for expansion
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