For farming families, managing debt and regularly reviewing your lender’s terms in context of your needs now and in the coming years, is an administrative task no one is in a hurry to tackle.
Debt can work for or against you. To avoid the latter, it’s important to plan and prepare your brief for lenders well in advance, and that means starting now to be ready for 2024.
I get it. At this time of year, you’ve got plenty of other things on your mind. Hay has to be baled and sheep must be shorn.
But the fact is, the profitability of all your hard work can be undone if you don’t have the funds you need to pay suppliers or if your current debt arrangement is creating unnecessary hardship.
Putting lending arrangements in place takes time.
Even simple applications can take four to six weeks, while more complex lending or refinancing for ‘stress’ lending purposes can take as many as nine months to process.
Believe me, when you’re in a stressful situation, a lengthy lending application timeframe won’t help your state of mind.
My approach is to plant the seed now (pardon the pun) so a methodical pre-planning process can begin and the details can be firmed up over the coming three months leading into the end of year.
This will mean you’ll know exactly what your lending requirements will be and you’ll have a comprehensive plan ready to put out to tender early for the year ahead.
When I say you, I mean us.
As a multi-disciplined farming business adviser, I take a three-prong advice approach that includes helping you to identify your current and future agri-business needs, deciding on the amount of funding needed to fulfil those requirements in context of your personal financial planning and future succession strategies.
All these things overlap for farming families and it’s important that each part considers the whole which is why I take an overall helicopter view of circumstances specific to each farming business.
Because everyone is busy, I work through a structured framework. This is to make it easy to come back to it and carry on when you need to step away to deal with something else.
The process I’m about to outline here works toward creating a comprehensive report that identifies and clarifies finding needs for the coming 12 months.
It will be a business and debt management tool for you, while enabling a lender to quickly assess your requirements so an appropriate and competitive lending offer can be provided.
Its purpose is to build a business case that reflects your goals for the farming business now and in alignment with your personal financial requirements.
This begins by clarifying your goals, which I do using a one-page document.
Many of you may already be familiar with my Goals Sheet. It has just six boxes on it and simply asks you to identify what you want to achieve in the next 12 months, 5 years and over 10 years.
It then asks you to consider what you want to achieve in retirement, farm succession which can take a while to implement, and after that, your estate and the legacy you’d like to leave when you’re gone.
While there needs to be a master plan, things can and often do, change. Your Goals Sheet needs to be reviewed annually to make sure that when things change, your planning allows for it.
Together we’ll create a snapshot of your farming business. This indicates your assets and liabilities now and the various entities holding them along with any existing debt structures that need to be considered.
Outlining any future debt requirement is also important. For example, you may wish to purchase more land or additional equipment.
Bringing all this together for lending purposes involves identifying your non-negotiables, ideal outcomes and the what-if implications of a ‘smashed out of the park’ scenario when everything comes together to deliver better than expected outcomes.
With all these matters considered and compiled into a succinct lending brief, I can put it out to tender for you and expect to receive back appropriate lending offers within a reasonable timeframe.
I’ve been doing this for over 35 years, and I’m not suggesting it’s an easy process my experience simply enables me to do much of the heavy lifting for you.
It’s also helpful to defer to someone like me when you’re up to your armpits in the shearing shed.
I’ve got a good grasp on the lending process, and I can provide insight and advice from an agri-business perspective in context of your personal financial planning. As I said – a helicopter view.
The main point of this article is to get you to start thinking about next year’s lending requirements now, because securing the lending arrangements that are right for you takes time.
If you would like to discuss agri-business planning and lending requirements, please contact me on 08 8253 2906 or email email@example.com
Phillip Dibben is an Authorised Credit Representative of Riverland Lending Services Pty Ltd, ABN 37 145 814 080 ACL 391825, an accredited adviser with P2P Agri and an accredited mediator under the National Mediator Accreditation System (NMAS).
He is also a financial adviser at Active Financial Management. Active Financial Management and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.
This information does not consider your personal circumstances (including taxation) and is of a general nature only. You should not act on the information provided without first obtaining advice specific to your circumstances.