Comment by bryanlarsen
3 hours ago
When my parents started farming they had about a half dozen large loans for the base farm, land, equipment, buildings and an operating loan to purchase seeds and other inputs in the spring.
When they retired they didn't have any money in the bank besides the proceeds from their final harvest, but all their loans were paid off. That's where the profits went -- paying off the loans.
The farm was their retirement savings. They sold it off for high six figures, and that's what funded their frugal but comfortable retirement.
The neighbor's son bought the farm; I hope he's pretty much paid off the loan he took out to buy it.
But that's how it is supposed to be. You "just" need to have a system that incentives banks and small entrepreneurs to take on that risk, and makes it not a good investment for PE.
What makes that system rare is that there's a buyer who knows the business available. The new owner needs to understand the industry and convince the bank that they know how to run it as a successful business. PE do their homework on the business before they buy it and don't have to convince the bank that they know what they are talking about. The neighbors son isn't usually an expert on the your business.