Interest: a cost or an investment?

In today’s world, deciding whether interest is a cost or an investment can be a bit mind boggling, especially if you want to expand your farming operation but the only way to do so is to take on more debt. Recognising that there are ways that you can leverage your farm to increase your net wealth down the track is just one strategy farmers are using to grow their farming business. 

Here’s a bit of background info: interest sits on the profit and loss statement as either a cost or an expense. If you want to increase the productivity of your property through acquisition of assets (purchasing additional country or another farm, buying livestock or purchasing machinery) we can make use of leverage and pay interest (cost) with a view to increase our return (profit) in the future.  

Leverage can be useful tool to use when looking to increase your net wealth but, as always, there are accompanying potential risks that need to be considered before making a decision. In saying that, the agricultural industry is particularly well suited to using the farm as leverage for growth and expansion, if it is managed well as part of an overall plan.