There are more than 87,000 farms in Australia and in 2022, they contributed 2.25% to our GDP, provided half the food we eat, and employed almost half a million people.
Clearly, farming is big business, but unfortunately, it’s also very seasonal. Many farms suffer from erratic cash flow caused by patchy income and volatility in the prices they pay for supplies and the prices they achieve for their products. This can leave many farms struggling to expand, unable to cover supply costs, and late to pay mandatory obligations, such as GST. Specialised agricultural finance has grown to plug these gaps – providing tailored long-term loans to buy land and expand production, asset financing for farm equipment, and working capital finance to meet the daily needs. Read on for an overview of agricultural loans and how they can help you grow your farm into a high-performing business.
Many farms are land rich and cash poor, with income that is volatile. Their erratic cashflow may be the result of seasonal patterns, or it could be caused by slow payment by large wholesale buyers. Either way, lack of working capital, or investment funds to expand, puts a brake on profitability and can cause permanent harm to the business. Farmers often need funding to buy more land, build infrastructure, pay for supplies, such as seed or cattle, and invest in new machinery. Fortunately, as diverse as farmer funding needs may be, there are just as many loans available, and they can cover almost all eventualities and for every type of farm.
A long-term loan used to buy a whole farm, farm buildings, or land to extend the property. Borrow up to 90% of the purchase price, with the farm or land providing security for the loan. Pay the loan back over 1 – 25 years.
A form of lease that can pay for new plant and machinery. Use the purchased item while you pay for it. The asset acts as security for the loan.
Short-term borrowing to plug the dips in cashflow. Suitable for almost any day-to-day expense. Pay for supplies and services, distribution costs, maintenance expenditures and more. May be obtained with or without security.
Functions like a bank overdraft. Dip into the available cash pool as and when you need it. Pay back what you borrow as customer payments come in.
Eligibility for an agricultural loan typically include individuals, businesses, or entities engaged in agricultural activities. This can include farmers, ranchers, agricultural cooperatives, and agribusinesses. Lenders often consider factors such as creditworthiness, collateral, farming experience, and the purpose of the loan when assessing eligibility. Additionally, government programs and financial institutions may have specific criteria and requirements for different types of agricultural loans, aimed at supporting sustainable farming practices, rural development, and agricultural productivity.
Farms may need more than one type of financing to cover their immediate, mid-term and long-term needs. Trying to organise different agricultural loans from different lenders can be slow and disappointing. Working with a broker, who can access many types of financing from a wide range of lenders, can solve this dilemma. No more searching or completing endless applications. Simply indicate your funding needs, tell us what you wish to accomplish, and leave the rest to us.
When applying for an agricultural loan, it’s important to follow a systematic approach. Firstly, research potential lenders who specialise in agricultural financing. This ensures you’re approaching lenders familiar with the unique needs and challenges of agricultural businesses.
Next, prepare a comprehensive business plan detailing your farming operation, including your goals and financial expectations. This plan should highlight your experience in the industry, your chosen agricultural practices, and your strategies for managing risks.
Gather all necessary financial documentation, such as income statements, balance sheets, tax returns, and proof of collateral. It’s key to make sure these documents are accurate, up-to-date, and well-organised to present a clear picture of your financial standing to potential lenders.
Once you’ve selected a lender, submit your loan application along with the required documentation. Be prepared to provide additional information or answer questions about your operation during the review process.
Finally, stay engaged and responsive throughout the application process. Address any concerns or requests for clarification promptly and professionally to demonstrate your commitment and willingness to manage the loan responsibly.
By following these steps and maintaining open communication with your lender, you can increase your chances of successfully securing an agricultural loan to support your farming business.
You reap what you sow. Get the best rate, the best terms and the right agricultural loan for your farm. Contact Swoop today.
Swoop was amazing! I was looking for refinancing and they were straight onto finding me the best possible option. I would highly recommend them.
Owner, F45 Cambridge
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.
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