Farm Finance – What Makes a Farm Loan Different?

Ever heard of farm finance? Before we explore this type of financing, you should be aware that farmers are often referred to as the “backbone” of the nation. They feed us, their exports support the economy, and they provide the raw materials for countless products we use in everyday life. However, farmers face some unique challenges. 

According to one report by the NSW Department of Primary Industries, farmers face a variety of issues “including seasonal, environmental conditions, and market volatility.” Interestingly, this same report found that the key to farmers overcoming challenges and maintaining financial stability was a structured business plan. And obtaining suitable farm finance is integral to the success of any business plan.

Navigating Farm Finance

Financing a farm can be an incredibly complex process. Farms, by their nature, are a mixture of home, business, agriculture, and asset concerns. A typical farm might include a combination of property, livestock, machinery, and specialised equipment.

For this reason, purchasing a farm is never just a case of applying for a typical mortgage or even a business loan.  Because of these unique complexities, a tailored approach is required when it comes to financing a farm.

Agribusiness Loans Require Expert Advice

The Australian finance industry has experienced multiple changes in the wake of the COVID-19 pandemic. Lending criteria tightened, interest rates have gone up and many rural Australians are finding it more difficult to obtain farm loans. In this type of financial climate, it has become more important than ever for farmers to seek expert advice before applying for agribusiness loans. 

In one survey of banks conducted by Grain Central, CBA commented that funding turnaround on farm loans often came down to the quality of the information it received. “A common reason for delays is that we don’t always receive the requisite information,” they stated. To avoid delays and ensure you’re getting the best rural finance solution to suit your needs, start by talking to an experienced farm finance professional.

The team at ZEP Finance has both the experience and the dedication to create a workable financing solution for farmers in Northern New South Wales and South-East Queensland.  We’ll consider both your long- and short-term goals to ensure you obtain the ideal farm loan to help your business grow.

The Business of Financing a Farm

Farming is generally a cyclical endeavour that requires a combination of financial planning and available support structures. Not only do farms run on extremely tight margins, but they also have a varied and vulnerable source of incoming cash flow. Agribusiness loans are a great option because they are accommodating to the needs and realities of farming. Tailored farm finance loans are designed to support the type of purchasing necessary for working farms.

Commercial Solutions for Rural Finance

Australian lenders offer a range of commercial-specific and equipment-specific loan solutions tailored to the unique needs of the agricultural sector. These include:

1. Equipment Loans

Designed to finance the purchase of machinery and tools, equipment loans offer flexible repayment terms and potential tax benefits.

2. Commercial Property Loans

Useful for acquiring additional land, a commercial property loan comes with long-term financing and can be used for land development projects.

3. Livestock Financing

This specialised farm finance solution allows for the expansion of livestock inventory and can be structured to accommodate seasonal variations in livestock-related expenses.

4. Working Capital Loans

This is a short-term rural finance loan that can address immediate cash flow needs during varied phases of the agricultural cycle. It can often be structured as a line of revolving credit for ongoing use.

5. Renewable Energy Financing

Some farm loans are specifically designed for investment in renewable energy solutions. These often come with added incentives or lower interest rates (to promote sustainability).

6. Agribusiness Loans

Agribusiness loans can assist farmers with diversified operations (such as the processing, packaging, and marketing of agricultural products). They provide comprehensive funding and are ideal for businesses looking to scale up.

Farm Finance: A Family Affair

Farming is traditionally a family affair. In a report by the Australian government’s Department of Agriculture and Water Resources, over 95% of Australian farms are family-owned and operated. Since there is generally a strong desire for families to retain ownership over multiple generations, it affects the range and scope of farm finance options available. 

This is why a personalised financing solution, advocated by your broker, is such a good idea. Don’t think of a farm finance broker as just providing a one-off service. Think of them as the partner that will help you achieve your rural finance goals.

ZEP Finance: Your Partner in Farm Loans

At ZEP Finance, we are in the business of helping you achieve your rural finance goals. Our expert team of brokers specializes in creating farm loans that are the perfect fit for your individual situation. To find out more about farm loans and alternative rural finance solutions, contact us at Ph: 1300 557 027 or use our convenient online platform to book a free appointment. We look forward to hearing from you soon!