Why the agri-finance market is so inconsistent

You might have chatted to other farmers about finance and wondered why they got a different rate from you even though you have many similarities between businesses. Or maybe you’re getting offered different loan terms between lenders even though you’re giving them the same info. It’s something we see regularly, and fortunately, we’re able to get excellent insights into why these inconsistencies happen through our relationship with lenders across Australia.

So why are lenders inconsistent? There are many factors that they look at; bank revenue and profitability KPIs, your equity in the farm, capacity to pay, management strategies and systems in place to ensure the business’s profitability.

Frustratingly, some inconsistency on the interest rate and whether you get a loan or not comes down to the risk appetite of the individual banker you are dealing with. A busy banker may assess your application simply on their view, it has been said that 20 per cent of Agribusiness Bankers write 100 percent of their Banks Business so if you happen to meet a Banker who is not part of the 20 percent you are likely to get a poor outcome. There are over 1000 Agribusiness Bankers across Australia in different organisations so you need to avoid the 800 that will likely give you a result that will be less than desirable.

Despite these influences, there are things you can do to place your farming business in the best possible place to get a loan at a competitive interest rate with the right structure.

  1. Presentation is essential: A professional presentation with the bank is critical for a successful application. This includes submitting a well-thought-out and researched business plan, forecast, cash flows and that you operate with sound management and systems.
  2. Get a second opinion: Bankers have different KPIs and profit goals to achieve, so if you get a result from one, visit others for a second opinion.
  3. Check the market: As a rule of thumb, we suggest you test the market every three years to see if you can get a better rate or terms on your loan.

It’s also a good idea to take a long-term view of your farm and appreciate that it will change over time, so loan terms and rates will vary with those changes. Business banking is a people game, so you need to make sure you get the right advice when dealing with your local lender.

For further information, please speak to your SproutAg Advisor.

How to make the best impression to your bank

There is a lot involved in an Agribusiness loan application. You’ve got to prepare financial documents, pull together forecasts and show your farm can repay the debt. With our experience working with over 20 different lenders, we’ve understood these difficulties and, importantly, what makes the best impression.

This article provides tips and hints on the information you need to present to the bank to put you in a strong position. To get there, you need to provide information that falls under two categories; background and overview, and business performance and planning.

1. Background and Overview

As it sounds, this is the opportunity to give the lender a background and overview of the farm and provide information that falls under these subgroups.

Big picture of the farm

Look at this as the introduction to your business. Start with an overview; production, farm history, the length of your involvement and past growth. You should also include the ownership and trading structure of the farm, for example, a family trust.

Organisational structure

With the big picture documented, you’ll also need to provide an organisational chart that includes information on how long the farm has been operating, who does what within the business, include the names and ages of family members.

Layout what you’re asking for

Explain clearly how much you’d like to borrow and why you want the loan; for example, do you want to expand the farm?

If the farm business is split into different entities, you’ll need to explain which entity is borrowing the money.

2. Business Performance and Planning

In this section, this is where you outline the historical performance of the business and provide a forward plan to demonstrate the resilience of the operation.

Financial Reporting

Provide historical financial statements so you can show the performance of the farm in previous years. You’ll also need to explain losses if you hit a terrible season. It’s a good idea to provide the last three years of financial information and tax returns for all entities involved in the farm.

You’ll also want to hand over a three-year cash flow forecast along with your rationale and assumptions in coming up with the estimates. It’s best to lean on the conservative side with estimates on production.

It is good to give the bank an assets and liabilities report that includes everything connected to the farm and personally. All this information combined provides the bank with a solid understanding of the farm’s financial performance and any liabilities it is carrying.

Business Plan

A business plan works alongside your cash flow forecasts as it shows where you see the farm in three to five years. It articulates your goals for the business and will capture any plans to grow, venture into new production and who will be doing what.

Presentation is key to a successful application, so take the time to prepare documents and forecasts ahead of time and make sure they are in one location. When meeting the bank, you should ensure you look and act professionally.

We can’t guarantee this will get you a loan, but if you follow these suggestions, you put yourself in the firmest place for a yes.

If anything is unclear in your application, or if you want help pulling together your application, SproutAg is here to help.

Please speak to your SproutAg Advisor for further information

How equipment finance can impact your borrowing capacity

In his 2021 budget speech, Treasurer Josh Frydenberg announced the extension of the instant asset write-off and a lift from $30,000 to $150,000 for new business equipment finance.

The extension is good news if you want to purchase a new piece of farm equipment because of the tax incentive it gives your business, but there can be unintended consequences if equipment finance hinders your ability to take on a loan to grow the farm.

So, the answer becomes a balance between lifting productivity with new farm equipment that can cut labour costs and sow or harvest more precisely with more land to farm.

When considering farm equipment, you can rule out smaller purchases like a new ute because these do not significantly impact your borrowing capacity. Instead, consider the impact of equipment that costs $500K or more.

A simple case study to consider; a farmer wants to expand production and is weighing up buying on-farm grain silos $500K to store their grain and cut costs, or they could purchase the farm next door for $2 million and produce more grain overall.

In this scenario, the loan term on the grain storage assets is five years, versus 20 years, to pay the loan for the additional land. As unlikely as it seems, the monthly finance payments are lower for the $2 million loan because they have longer to pay, and in this instance, the better decision is to buy the neighbouring land.

Ultimately, it comes down to goals and making investment decisions that align with them. If you are at all uncertain about how to strike the right balance, speak with your SproutAg advisor.

Interest rates: to fix or not?

  • Don’t rush to fix your rates – take the time to do your research
  • No one can predict when interest rates will change, so make the decision based on your farm’s financial needs
  • Don’t be pushed into a decision.

In this month’s note, we look at whether you should fix your interest rate or not. Like commodity prices, interest rates rise and fall depending on macroeconomic conditions – none are accurately predicted.

You can look for guidance, like the recent Australian Reserve Bank announcement explaining interest rates won’t be lifted until the inflation rate falls within its preferred range of between 2 to 4% – something they don’t expect until 2024.

Considering you can’t predict the unpredictable, you should also use these considerations when deciding if you’ll fix your interest rate or not.


Break costs

Early payout or changes to terms can cost more than the savings made from fixing the rate. It can occur if business profits, land sales, or a restructure like a family succession pays out the lending facility.

Pay down debt

It would be best if you allowed for potential debt reduction over time.

Length of time interest rate is fixed

A shorter fixed-rate portion doesn’t provide a lot of protection against interest rate movements.

As a rule of thumb, fixing a portion of your debt is a better option as it protects you from an interest rate rise while giving you the ability to reduce debt.

Business Growth and Flexibility

Understand the stage of your business because you may need the flexibility a variable rate provides if you are going through a period of growth or are handing over the farm to the next generation into the future.

A changing business allows you to look at new borrowing entities needed and adapt to these new requirements.

If you find yourself pressured into fixing your interest rate, consider what’s in it for the person or the business championing a fixed rate? Bankers can get a bonus when a client fixes their interest rate and so may not have your best interests at heart.

We’ve provided general advice in this note, so if you’d like to speak about your farm, get in touch with a SproutAg advisor today.

Raising farm finance in 2021 for acquisition or expansion

2020 was a significant year for farming businesses, as we witnessed record number of sales across the eastern seaboard; and saw land values soar to new records. Many businesses saw the opportunity for expansion, however, unfortunately, many potential land purchasers missed out on securing properties as a result of not being properly organised.  Sadly, many were unable to close on their negotiations as they simply ran out of time. Lengthy bank processes and the unchartered constraints COVID-19 presented; found many businesses blindsided, unprepared, and ultimately, disappointed as they tried to raise farm finance.

At SproutAg, we saw success where we were involved in the beginning stages and early conversations regarding plans for expansion, as we were able to assist with some of the nuances regarding obtaining finance in these unprecedented times. Being able to provide initial guidance and provide a clearer understanding of the changes we now face in the lending industry; led to much better outcomes for these clients; and avoided many unnecessary stresses and disappointments that we witnessed with clients we were involved with later in the process.

Fact: Raising farm finance has changed and, due to a multitude of reasons, is more complicated than ever before.

So, at SproutAg, we thought that it would be helpful to give some guidance to those who are wanting to purchase a rural property or simply expand their business.

May your purchase or expansion in 2021 be successful and seamless.

Best regards,


Here are our Top Ten Principles:

  1. Invest time upfront and get organised. Have your latest financial statements/tax returns on file. Ensure all your tax is paid, and up to date. Your bank statements must be easily accessible. No farm finance deal will be considered without these documents; nor will any agri banker take you seriously until you provide them.
  2. Professionalise and systemise your business administration. Have a soft copy of important documents, readily available to send if required.
  3. Thinking about purchasing? Talk to us at this stage. Don’t wait for the “right” farm to come on the market. Get on the front foot and be ready for when it does.
  4. In your business it would be rare that you would only get one perspective/opinion. The agribusiness banking market is renowned for being one of the most inconsistent service sectors that you could deal with. Get many perspectives and opinions.
  5. Have a proactive professional team around you that understands your plans to purchase. Ensure they are ready, prepared and organised.
  6. There is no such thing as a fast “pre-approval” application in agribusiness banking, as each acquisition is based on the individual earning capacity of that farm. Ensure all people understand the length of time it takes to complete the transaction.
  7. Understand your borrowing capacity thoroughly. Work on different scenarios for your ideal property to ensure that you are ready.
  8. Understand the current supply chain in farm finance with your banker.
  9. Be proactive and use your agent.
  10. Communicate early. Don’t wait until the terms have been finalised before communicating to your financier as this can impact the timing of the sale or mean that you cannot close.

In summary- Get organised and be prepared!

Why succession planning on Christmas Day is not a good idea

Christmas can be known as much for family barnies as it is for prawns and a leg of ham for lunch, which is why it’s not the time to talk succession planning.

The temptation, however, to use Christmas to talk succession planning is strong for many families this year because of lockdowns and an inability to catch up as much as we’d like. Despite this, you should instead use Christmas to build or keep the close relationships needed to make succession planning a success. What’s worse is a family catch up that sours because an unplanned and structured succession planning session will sour the day and make you less inclined to catch up again.

Our best advice is to hold off until the new year and then with agreed dates to give the structure and formality needed for successful succession planning and business decision making. This structured approach is also better as it allows everyone to prepare, and for the discussions to be held in a formal way that gives everyone a say.

To be successful what is discussed and decided upon should be communicated to everyone in the family, whether they’re working on the farm or not. This gives everyone the comfort they are in the look with what’s going on and no one feels shocked or surprised. Building strong communication is vital for successful succession planning.

Forums should be created to achieve certain goals. Some should be set aside to make decisions about the business with those family members who work on the farm, there should also be regular forums for those who own the business.

So, this Christmas leave family days to relaxation, celebration and the enjoyment of being with family, and leave the strategy discussions to their scheduled forum dates.

Merry Christmas and a prosperous New Year.

Three traits for a successful succession plan

When it comes to creating your succession plan, many things can lead to its success or failure. After years of sitting in on succession planning workshops, however, we’ve found some common traits that overcome the difficulties to create a successful plan.

Kindness and Empathy

Showing kindness and empathy, especially when others in the family aren’t or you’re under pressure is tough. However, this is critical in succession planning as it can be a balance of everyone’s goals and ambitions and so understanding a different point of view is vital.

It’s easy to forget the way family members act is influenced by their own concerns and issues. Regardless of the circumstances you shouldn’t be a pushover because you’ll never understand why they are reacting the way they are. Instead, listen, empathise and show some kindness in order to keep the succession planning process on track.


We all know working on the farm isn’t easy. It’s stressful, hard work and you are largely at the mercy of the elements, but we’re much better off than many other family businesses. That’s because in most cases the farm is handed down through the generations passing on a net worth significantly higher than the average Australian. Despite this and the significant growth agriculture has experienced over the last 20 plus years, many farming families are hard on themselves because of communication issues or they are having difficulty with some aspects of the farm.

Not being able to appreciate what we have can be destructive and shut off potential opportunities as people talk them down or put them in the too hard basket. Instead, think about the fortunate position you have and be grateful.


As advisors we’re stunned by the loss of a successful operation because impatience derailed succession planning talks. We’ve seen this happen from first generation farms to families whose property has been in the family for over 100 years.

The key thing to remember is there’s plenty of time to do the things you want professionally and personally even for those living and working well into their 80s. The next generation has decades to build their family and farming practices, even those in their 60s may have twenty plus years of working on the farm. With all this time each generation should recognise there will be a long time sharing the farm and working together when balancing their goals.

Patience is needed to work through life changing events like business and land transfers or changes in roles. Don’t let impatience derail the family business!

Being mindful of these traits can take the stress out of succession planning and create a more open environment to talk through any issues raised.

Time to talk mental health and succession planning

As a financial services business you might expect we focus on the numbers and business goals of a farm, but often we find ourselves sitting down with clients who feel lost after leaving the farm. Whether they’ve sold the property or handed over to the next generation we get asked the same question, “what do I do now?”

The impact of retirement on mental health is an important consideration that is overlooked by younger generations. A person who has spent their whole life on the farm, building it up and keeping it going during hard times will find it hard to let go.

In this article we talk about mental health and succession planning because it is just important as deciding on asset splits, financials and business goals. According to the Black Dog Institute, one in five Australians will experience mental illnesses in any year while only 35 percent will seek professional help.

A major cause of mental illness is anxiety, though not knowing what to do next or how to handle the responsibilities of taking over the business. These are questions that should be addressed during the succession planning process.

Identifying anxiety

While working with families on succession planning, we often come across at least one family member who is experiencing anxiety. There are many types of anxiety, but they share common signs and symptoms, such as:

  • Very worried or afraid most of the time
  • Tense and on edge
  • Nervous or scared
  • Panicky, irritable, or agitated
  • Worried you’re going crazy
  • Detached from your body and feeling nauseous.

When experiencing anxiety you may overthink things – everything’s going wrong, or I can’t focus on anything but what’s worrying me. You might also set yourself unrealistic expectations or have excessive fear.

It is common for succession planning to trigger anxiety and can be a reason a sticking point or concern is not talked through during the planning process. It can also be the reason people have an angry reaction and argue which can derail the succession planning process.

Helping get through anxiety

There are ways you can help yourself, or a family member who you suspect is having issues with their mental health. An easy way to remember what you can do is ALGEE.

Approach the person, assess, and assist.
Listen and communicate non judgementally.
Give support and information.
Encourage the person to get appropriate professional help.
Encourage other supports.

Mental illness may be the reason your family is stuck and not progressing. It is really important the family member experiencing mental illness seeks the right help and is supported appropriately.

Reach out to your local GP or the following organisation if you need support with your mental health.

Communication and the one-page plan

• Visualise the farm’s goals and aspirations
• Identify key dates and put them in a timeline
• Regularly review and communicate your transition plan

We’ve talked about developing a transition plan and testing it to make sure it stands up, and in this article, we outline how to communicate the plan, so everyone understands it.

The first step might sound obvious, but it is essential to write it to leave no room for interpretation. When we bring clients into the office, we work through our “one-page plan” tool to visualise all aspects of the farm business and plan. In one page, we sketch out short and long-term business goals, who is involved in running the farm and what they do, and a transition plan timeline so everyone can see the goals, who does what and when the transition will happen. The one-page plan does not go into the micro-detail.

This approach aims to get everyone on the same level when they think about the farm’s goals and aspirations. It doesn’t leave anything open to interpretation as family members can come to different conclusions.

It’s an opportunity for the family to focus on that top-level detail that can often be forgotten or pushed aside in the farm’s day-to-day operation. It’s a trigger for events on what needs to be done, like the retirement of the existing generation or fair compensation for off farm siblings and the timing of those key events.

With their one-page plan in place, we encourage our clients to continually look at it and assess whether the goals and aspirations are still relevant or if they need an update. This is particularly the case if something unforeseen happens, like three years of drought creating severe pressure on cash flow.

Do not overlook communication. We recommend families get together every quarter to review their transition plan to keep everyone on the same page and allow them to speak up when things change.

With a one-page plan and a communication strategy in place, you’ll have a document that will get you through challenging times. Speak to your local SproutAg representative to learn about how to communicate and put your transition plan in place.

Succession Planning: the family deal

It’ll come as no surprise that most families have a verbal deal about succession planning: who will take over the farm. These verbal deals go something along the lines of, “the boys get the farm, while the girls get the house in town and the super.”

But life happens; children grow up, move away, get married and perhaps end up in a business of their own that make these informal agreements obsolete. Instead, we suggest a plan that changes with the times.

So that we are on the same page, we are talking about succession planning or transition planning, as we prefer to call it. We call it this because the handover of the farm takes a long time as the older generation works with the next before handing it over entirely.

A transition plan captures who gets what and when it will happen after a process of listening to and balancing everyone’s goals, their challenges and wants, all the while keeping an open dialogue to manage conflict when it arises.

It’s a process we’ve gone through with many families as an independent and objective listener and mediator. There’s no set timeline for this process because it takes time, dependent on family circumstances. Typically, we go through the following stages to take a family through the transition/succession planning process.


  1. Getting to know you and the family

We start with one-on-one chats with everyone to get to know them, what drives them, and what’s behind their decision making.

We also take the time to get to know the family culture and their overall values to get the big picture.

  1. Goals and common ground

Once we get to know everyone and understand the big picture, the next step is to plot out individual goals to draw out common themes.

  1. Begin to shape the plan

With everyone’s goals identified and with the overall values and culture of the family known, we shape the transition plan, so it acts as a reference point to discuss.

  1. Get everyone at the table

With the basic plan drafted, the next step is to get everyone at the table to discuss and, where needed, bring in experts to offer advice. An essential part of this step is to run the meetings as if they were a board meeting with an agenda and a chair to make sure everyone contributes.

  1. Speak up

Everyone should be clear about their intentions and speak up at this stage, so everyone has their say.

With input from everyone, the next step is to complete the transition plan, distribute it to everyone and have their sign off, so everyone knows what it means for them and the family.

As a live document, the process doesn’t stop once with the written transition plan. It will need to be updated as things change, and importantly, it must communicate changes to the whole family. The transition plan should contain no surprises.

If you want to talk about transition plans, contact your SproutAg representative.

DISCLAIMER: The information in this email is general and does not constitute financial advice.