I Borrowed $178,000 to Spread Fertilizer

This transcript features a conversation with a 22-year-old named Leland, who started a custom dry fertilizer spreading business. Unfortunately, the business has gone backwards, and he is facing the repossession of his equipment on April 1st. Leland explains that he purchased a John Deere applicator for $178,000, with an annual payment of $40,000. He put down $12,000. He has been in the agriculture business his whole life, but the loan itself raises questions for the interviewer, who expresses confusion as to why a 22-year-old would be loaned such a significant amount with a relatively small down payment. Leland acknowledges that he had a way into the business initially, but since then, things have deteriorated. He has tried to sell the equipment through an auction company, but they required a $100,000 upfront payment, which he couldn't afford. His initial plan was to spread 10,000 acres a year. However, he found that the farm economy has been challenging, with high fertilizer prices and a shift away from dry fertilizer spreading. He put his name out within a 100-mile radius, but the business did not materialize as expected. Leland admits that the situation is scary and has been haunting him. The interviewer shares a similar experience of going broke at age 28, stating that Leland's mistake, while significant, was not as financially extensive as their own past errors. The interviewer expresses that the entity that loaned Leland the money deserves to lose money for approving such a deal. Leland admits he can't recall the name of the company off the top of his head, despite owing them $178,000, as the information is at his house. He clarifies that he does not owe John Deere directly but a separate company. The core lesson highlighted is the danger of borrowing money to start businesses, as things rarely go exactly as planned. The interviewer emphasizes that Leland learned this lesson at 22, giving him the rest of his life to avoid repeating such mistakes. The advice given is to refuse future loan offers for new business ventures. Regarding the immediate situation, the interviewer believes Leland will have his equipment repossessed on the first of the month. They don't see a reasonable way to stop this, suggesting that while bankruptcy (Chapter 13 or 11) could delay repossession, it's a pipe dream because the business idea is dead and lacks the cash flow to be revived. The interviewer outlines the likely aftermath: the equipment will be sold at auction, and the lender will then pursue Leland for the remaining balance, known as the deficit. For example, if $178,000 is owed and the equipment sells for $100,000, Leland would owe the remaining $78,000. The interviewer estimates it will take about a year for the lender to pursue this deficit. However, there's a strategy for handling this deficit. Leland has a year to prepare. If he can save up a significant amount, say $25,000, by working extremely hard and keeping living expenses low, he could offer this as a settlement. The interviewer suggests that lenders often accept settlements at 20-25 cents on the dollar for car repossessions because they often collect nothing, especially from individuals with no assets. While not as experienced with farm equipment deficits, they believe a similar settlement is probable. From the lender's perspective, pursuing a broke 22-year-old for a large sum is unlikely to yield results. Therefore, a settlement offer would be attractive. Looking ahead, Leland will be working on a farm for friends, earning approximately $25 an hour, as he doesn't have a college degree. The interviewer encourages him to think about his long-term goals, aiming to be a millionaire by age 32, not just earning hourly wages, and certainly not by taking on massive debt for a business venture again. The interviewer reiterates the importance of building a "war chest" over the next year or two and waiting for the lender to contact him about the deficit. He advises Leland to then negotiate a written settlement. The interviewer expresses confidence that Leland can get through this, viewing it as a "dumb thing I did when I was 22." They share their own history of making costly mistakes in their early twenties. Finally, the interviewer offers to help Leland navigate the negotiation process if he needs it, emphasizing the need to develop a future plan that doesn't involve risky, "Hail Mary" plays. The conversation concludes with an invitation to call for assistance and a plug for the Every Dollar budgeting app.