Seeking out a Second Opinion on Your Banking
In a market where interest rates are continuing to rise, spending time to analyse the true cost of your business’s finance and compare against alternative options can be difficult, however is a necessary tactic. When it comes to articulating costs and fees, each bank has their own way of approaching a conversation with their client. The language used in these conversations can often be confusing and ambiguous due to the financial jargon used. As a result, it can be hard to understand the true cost of your debt, finance or loans when comparing alternative finance options.
At SproutAg, we offer a comparison tool that factors in every cost associated and allows our clients to develop a deeper understanding of their true cost of debt. This tool has been designed to give you more visibility, as interest rates are often a lot higher once you factor in all the associated fees.
Every bank uses their own language when talking about interest rates and associated fees, making it confusing to understand what they’re referring to. Some of the jargon used to describe fees and interest rates across different providers may include:
- Unused Line Fee.
- Line Fee.
- Facility Fee.
- Margins (not all margins are the same).
- Annual Fees.
- Negative margins.
- Package Fees.
- Base Rates.
- Reference rate.
- Corporate Rate
- BBSW.
- BBSY.
- Higher Rate interest.
- Different rates between facilities (different rates for term lending and overdraft lending).
- Difference rates for various term Loans.
- Bill Roll Over Fees.
- Variation Fees.
- Establishment fees.
So, if you’re someone who’s hesitant to review your finance because it is too difficult, we encourage you to take the time and compare “apples with apples” and gain a second opinion!
Debt Advisory Services
At SproutAg, we know that debt is a great tool for any business to use for growth (when managed well), and based on our analysis we believe that Australian farmers don’t review their banking often enough. * Over the course of a generation, we believe that the average Australian farmer or farming business can save at lease 450k, by reviewing their financial facilities every three years, compared to a farmer or business that is not. Of course, the cost is not the only answer and part of banking that you should analyse, other equally important factors are:
- Structure.
- Repayment Terms.
- Qualilty of your manager.
- The Banks/ Providers track record.
*Based on a $3million loan over 30 years and assuming a 0.5 reduction for the life of the loan, in comparison to a farming business that does not review their banking.
For more information, please see our Agrifinance guide and talk to your local SproutAg adviser about our debt advisory services.
