Aligning ownership in a family farming business

A key element of every transition plan is aligning the family business’s ownership goals. Ownership of assets is often the hardest agenda item for families to work through.

Farming businesses are now more complex than ever, with higher asset levels, higher debt levels and more family members involved across generations. Completing a successful transition takes deliberate time out of the day-to-day, and almost always requires structured conversations with family members involved. 

What we consistently see as advisers is that families often get 80% of the way through their plan, but as business pressures take over, the final 20% is left unresolved. That last portion is where the strategy comes together, where clarity is established, and where future conflict is avoided. When it’s left incomplete, unresolved decisions and unspoken feelings can create significant issues down the track.

How do we align Ownership and Assets Goals?

1. Current Family Leaders and Their Core Values

It’s important that the current leaders, owners, shareholders, partners, and/or directors first understand what they want. Every family is different, and at SproutAg we know that the values that shape a family come from upbringing, history of the farm, how the business formed, and the experiences of each leader (often Mum or Dad). These values are what guide ownership decisions.

These core values can be the driver around asset ownership into the future, and while there is no right or wrong answer, the existing leaders typically determine the asset allocation. 

2. Understanding Individual Financial Circumstances

Individual financial circumstances are also a key driver when aligning ownership and asset goals. 

Key questions almost always include:

1. What do Mum and Dad need if they step away from the business?
2. Is the farm financially sustainable in the future?
3. What level of debt can the business genuinely support?
4. What is a fair level of financial support for non-farming family members?

These questions help shape what is possible and what is practical.

3. No One Approach 

There is no secret recipe for the above; however, when all the stakeholders are considered carefully and thoughtfully, a workable direction usually becomes evident.

4. Include Non-Working Family Members

Their needs matter too. It’s important to consult and understand the needs and requirements of non-working family members. 

5. Farm Viability 

If the goal is to keep the farm, the numbers must stack up. If a family wishes to retain the farm, it needs to be viable into the future.  

If You’re a Family Leader, How Can You Get Started?

Take the time to sit down with your partner to map out your assets and what is important to both of you. 

Consider how you’ll feel later in life and what would be a satisfactory lifestyle? 

Ask the key question: Do we want to keep the farming business?

There is no correct answer, but if the response is yes, it often means financial outcomes between siblings will not be equal, and that’s where guided conversation becomes essential. 

For more information about Succession Planning, and getting the conversation started, contact us today. 

Have you ever had a conversation with a colleague, mate or even your neighbour, only to hear that they’ve found a better loan rate than you? 

Inconsistency in loan rates in agriculture is something we regularly see. At Sprout Agribusiness, we’re in a unique and fortunate position to be tendering out loans on a regular basis, so we have a sound understanding of where pricing should be. As a general rule, there are three factors that hold significant influence on a bank’s pricing.

1. Pricing that is driven by the cost of funding, that is driven by each bank’s exposure and reliance on deposits, wholesale funding and other funding requirements. 
2. Rates set by the RBA
3. Risk to the bank, and the probability of default, acknowledging that everyone is on a different risk margin. 

While securing a competitive price is a desirable outcome for anyone seeking a new loan for a farming business, it’s crucial to ensure that the bank you choose and the structure of your facility are aligned with your future growth. 

At SproutAg, we believe it’s essential to evaluate your pricing options to ensure your loyalty to your bank isn’t costing you money. When providing clients with a rate, banks add a risk margin to the base rate, which influences what you pay.  Our Bank Loyalty Tax Graph is an estimate of the price of loyalty to your bank. 

Inconsistency in rates also stems further than the three key factors, it also boils down to individual bank managers, and how they’re tracking against their budgets. A manager’s targets, profit and loss or revenue can all affect the rate you’re quoted. As an example, we can have the same client with the same risk grade looking at a 1.5% difference between individual branches within the same bank.

Top tips for how you get the best rate:

1. Be organised and properly tender out your business. Don’t just ask your existing bank for a rate reduction. 
2. Tender out your banking at least every three years. 
3. Prepare and provide the best information possible. To do this, make sure you check out our Finance Ready Check List.

By making the time and effort to get your banking right, you might just see your best pay day yet!

At SproutAg, we’re lucky to work with over 2,000 clients and regularly connect with agribusiness leaders across the country. This gives us unique insight into what really drives growth in family farming businesses.

First and foremost – get aligned.

The most important starting point? Ensuring the directors, partners, or current owners are aligned in their thinking around growth. When alignment isn’t there, the business often works hard but spins in circles. You might have a few extra dollars in the bank in ten years, but your asset base, business performance, or personal goals may not have moved much at all.

How do you know you’re aligned? Ask the simple questions:

• Where do you want to live in ten years?

• How do you want to spend your time?

• What are your key personal and business drivers?

• What role would you like to play in the business going forward?

It’s okay if you’re not 100% sure on all the answers, what matters is understanding each other’s priorities and identifying the common ground. If you’re not on the same page, you won’t move forward in the same direction.

Make the time to have these conversations.

We know how busy farm life is. Between the business, the family, and everything in between, time is short. But if you’re serious about growth, step one is setting aside time away from the day-to-day to work on the business, without distractions.

Then, put numbers around the plan.

Every goal needs a financial engine behind it. Growth often means investment, and opportunity, especially if you’re thinking about the next generation.

Start asking:

• Where do we need to be in 3 years to reach our long-term goals?
  
• What would our first steps be?
  
• What shape does our cash flow need to be in to make this work?
  
• What role do I need to play in that?
  
• Can we actually fund our ideas, or do we need to adjust?

A cashflow forecast is essential. Growth needs cash, and good planning helps ensure you don’t run out when you need it most.

Ongoing improvement is key.

Growth isn’t just about bigger numbers – it often means refining how you run the business, reviewing key processes, and continually improving performance. Regular deep dives into each area of the business are critical to staying on track.

What does a simple growth plan look like?

1. Carve out time to work on the business – regularly.
   
2. Align on your long-term personal and business goals.
   
3. Set 3-year targets to bridge the gap.
   
4. Check the cashflow – can you fund the plan?
   
5. Work on the business – not just in it.
   
6. Review and adjust regularly.
   

And just like that, you’ve built the foundations of a 10-year growth plan.

Need support to make it happen?

At SproutAg, we offer a one-on-one growth program called AgPro, tailored to your unique goals. We walk alongside you to create and implement a personalised strategy that supports real, sustainable growth in both your business and your life.

We’re proud to work with some of the best in the industry and look forward to helping you shape the next decade of your business journey.

Ready to grow? Get in touch with the team at SproutAg.

As we settle into Spring, the number of enquiries for livestock finance generally increases. With the end of winter cropping becoming more predictable and the prospect of a good season on the horizon, many graziers look to take advantage of the feed available. In addition to this, we traditionally see that livestock markets are stronger in the Spring and coming into Summer in comparison to crop commodities. 

We understand that the cost of running a farm or any business is high, and that it’s important to take advantage of opportunities when they present themselves. This is true for obtaining livestock finance to take advantage of the available feed as we move into a prosperous season, which can result in a profitable outcome. 

At SproutAg, we understand that profitability in a livestock business is made when you buy at the right time and for the right price, and this is made possible when your finances are prepared in advance. 

There are four main options when looking to raise livestock finance, and there are pros and cons to each.

1. Dedicated livestock financier.
2. Stock and station agent.
3. Main bank financing.
4. Cash in the bank.

*The following commentary is general in nature and does not take into consideration personal business circumstances.

 

Dedicated Livestock Financier

Pros

• Quicker turnarounds.
• Dedicated facility.
• Easier to get approved.
• Frees up security for the main bank.

Cons

• Higher interest rates at 12-14%.
• It can be complicated from an ownership perspective.
• 12-month term only at times.
• Right to mortgage parameters in documents.

 

Stock and Station Agent

Pros

• Easy to get approval.
• Dedicated facility.
• Frees up security for the main Bank.

Cons

• Have to market stock through an agent.
• 12%+ interest rates.
• Funding can be unpredictable and based on the agency’s own cash flow.

 

Main Bank

Pros

• Cheaper rates of 5.50-6.50%
• Cleaner with one financier.

Cons

• May use valuable land security.
• It can be more restrictive, and the bank may not be able to use security.
• May not be able to access.

 

Cash

Pros

• Easy to access.
• No interest rate unless out of your own overdraft/ term loan.

Cons

• Does this impact other parts of the business?
• Is the cash required in the future for the business?

 

Want to understand your risk and get support – reach out to the Sprout Team!

Can I Get a Home Loan as a Business Owner? Here’s What You Need to Know

Running a business can offer flexibility and freedom, but when it comes to applying for a home loan, it can also come with a few extra hurdles.

At Sprout, one of the most common questions we hear from self-employed clients is:

“My accountant helps me reduce tax, will that hurt my chances of getting a home loan?”

The short answer? It might.

But with a little forward planning and the right advice, getting a loan as a business owner is absolutely possible.

Here’s what to keep in mind when reviewing your profit and loss, tax returns, and planning for personal lending, like a home loan or residential investment.

1. Be Upfront With Your Accountant About Your Lending Goals

It’s standard practice for accountants to help reduce your taxable income by writing off expenses and reinvesting into your business. But if your business shows little to no profit, most banks and lenders will view your income as low or unreliable.

If you’re considering buying a home or investing in property, let your accountant know early. Distributing more profit to yourself, on paper, can make a significant difference when applying for personal lending.

2. Lenders Will Look at Your Tax Returns, Not Just Your Business Reports

When you apply for a home loan as a business owner, lenders will request:

• Your personal tax returns
• Your Notice of Assessments (from the ATO)

These documents are used to verify your actual income. While your business’s profit and loss statement or balance sheet can provide helpful context, they aren’t the primary documents used for loan assessment.

3. What If I Pay Myself a Wage?

Depending on how your business is structured, you may be able to use your wages in a home loan application.

However, in most cases, lenders will still want to see the full business tax return, especially if your wage isn’t stable or represents only part of your income.

4. Getting a Home Loan for a House on a Farm

If you’re living on a rural property or part of a farm, the bank will need to do a property valuation. This is completed by an independent valuer arranged by the lender, and usually involves a full on-site inspection.

The valuation will consider land zoning, infrastructure, and whether it’s a working farm or a rural residential block. The clearer the residential portion is from any farming activity, the more straightforward the lending process will be.

5. What’s the Maximum Acreage a Lender Will Approve?

Some lenders are happy to finance rural residential properties up to 240 acres, depending on:

• The zoning of the land
• Location and infrastructure
• Your deposit size
• Whether the property passes the bank’s rural residential criteria

It’s worth noting: these approvals can vary significantly between lenders, so working with a broker who understands rural lending is key.

6. Can I Use My Farm as Security for Another Property?

Unfortunately, no commercial or farming land usually can’t be used as security for residential lending. If you’re looking to buy an investment property and don’t want to use cash from your business, you’ll need to use equity in a residential asset or contribute a cash deposit from your personal funds.

7. Is Interest-Only Lending Still an Option?

Yes, but only for investment properties, not for owner-occupied homes.

Interest-only loans can help manage cash flow, especially in the early stages of building a property portfolio. They aren’t suitable for everyone, so you must chat with your accountant before making the switch.

8. Building a Residential Property Portfolio: What You’ll Need

Here’s a high-level snapshot of what investing in residential property could look like:

• Deposit required: Minimum of 10% (20% to avoid Lenders Mortgage Insurance)
• Average investment loan interest rate: 6.10%- 6.60%
• Loan example: $400K loan = approx. $2,518/month repayments (P&I)
• Rental return: Around $380–$400 per week (based on average market figures)

With current rates, most residential investment properties are negatively geared, meaning they cost more than they earn, but this can provide tax benefits depending on your situation.

Takeaway: It All Comes Down to Planning

Getting a home loan as a business owner isn’t as simple as it is for salaried employees, but it’s completely achievable with the right advice.

✔️ Keep your financials clean and up to date

✔️ Involve your accountant early if you’re planning to borrow

✔️ Work with a broker who understands self-employed and rural lending

At Sprout, we specialise in supporting business owners and farmers through personal lending. If you’re looking to buy a home, invest in property, or just want to understand your options, we’re here to help.

Let’s talk about finance that fits your future.

Why Off-Farm Investment Matters in Succession Planning

At Sprout Agribusiness, we know that succession becomes far more manageable when farming families have access to additional assets. These assets create flexibility, allowing the current generation to step back from the business while providing options for compensation to non-working family members. One avenue we’re increasingly seeing our clients explore is off-farm investment, particularly in commercial property.

While there’s always a case to be made for sticking to what you know, diversification, when done prudently, can build long-term wealth and resilience. Especially as land prices have risen and productivity margins have tightened across mixed farming businesses (particularly in southern Australia), commercial property has emerged as a popular option. Many of our most progressive clients are choosing hard “bricks and mortar” assets over more volatile options like the stock market.

Let’s walk through an example of how a client might use existing equity in their rural property to purchase a commercial property with strategic debt funding support.

Client Scenario: Purchasing a Commercial Property Using Farm Equity

The Background

A client owns a rural property valued at $15 million, with only $3 million in existing debt, leaving significant equity available for investment.

During a strategic planning session with Sprout Agribusiness, the client identifies a goal of securing off-farm income to support retirement and long-term succession. With a 10–20 year outlook in mind, they decide to invest in a commercial property that offers solid returns.

The Investment

The client engages a professional to source a commercial property in a high-growth area. The chosen asset is valued at $6.5 million, with a net yield of 7% (after management fees and holding costs), equating to an annual net income of $455,000.

Sprout Agribusiness provides tailored debt advisory, helping the client leverage their existing farm equity to fund the purchase.

The Funding Structure

• Borrow $6.5 million at 5.5% interest-only 
• Annual interest cost = $357,500 
• Net rental income = $455,000 
• Excess rental income is used to pay down the loan principal 
• Acquisition costs (e.g., stamp duty) are paid from cash reserves 

Loan-to-Value (LVR) Snapshot

• Total asset base = $21.5 million ($15M farm + $6.5M commercial) 
• Total lending = $9.5 million 
• Combined LVR = 44.1% 

Understanding Commercial Lending Parameters

• Commercial lending is often structured as interest-only, which suits long-term cashflow planning. 
• Depending on lease strength and the borrower’s financial position, LVRs can reach up to 70%. 
• The strength and duration of tenant leases significantly influence the lending criteria. 

Long-Term Benefits of Commercial Investment

• Capital Growth: Over time, property values may increase in line with rental yield growth and CPI-linked rent reviews. 
• Decoupling the Debt: As the loan is paid down, the commercial debt can eventually be removed from the farm’s balance sheet, freeing up the original rural asset. 
• Income Stream: Upon full repayment, the commercial property can offer a secure income stream in retirement or support future family needs. 

Final Thoughts

At Sprout, we believe diversification is about control, not risk. When executed with sound planning, the right professional support, and a clear long-term strategy, investing in commercial property using existing farm equity can strengthen both the family balance sheet and your succession plan.

If you’re interested in exploring how this could work for your business, reach out to the Sprout Agribusiness team today.

 

Succession planning in farming businesses is rarely straightforward, and in a significant number of cases, there’s a debt component involved. Whether the business is currently debt-free or already carrying liabilities, the transition from one generation to the next often necessitates some form of financial restructuring.

Here are three common scenarios where debt funding plays a role:

Scenario One

The business has no existing debt. However, as part of the succession plan, the incoming generation needs to compensate their parents and/or siblings for land or equity. This introduces a new debt burden that must be carefully managed.

Scenario Two

There is existing debt in the business. As ownership or management transitions, this debt may need to be transferred, refinanced, or increased, particularly if the business is expanding or if asset transfer is involved.

Scenario Three

Mum and Dad begin stepping back from the day-to-day, but remain involved, while the next generation ramps up operations and growth. In this instance, both generations are working together, but often, the parents still hold land assets and therefore remain tied to business liabilities.

Why Debt Funding Matters in Succession

In all three scenarios, debt funding plays a pivotal role in shaping the feasibility of the succession plan.

A key part of the planning process is determining the appropriate asset compensation for the older generation, particularly around retirement needs, as well as balancing this with the financial goals and capability of the working family members. This includes assessing whether the business can sustainably manage the resulting debt into the future.

The Role of Debt Analysis in Succession

Sustainable debt analysis isn’t just a financial modelling exercise — it’s a core part of decision-making that affects all stakeholders. At Sprout, we typically refer to Year-In-Year-Out (YIYO) debt levels, that is, the level of debt the business can reasonably carry in an average year without undue stress.

Setting a realistic YIYO debt target helps determine how much equity can be transferred, what compensation non-working family members might receive, and how the business can maintain operational viability.

When Should You Engage a Debt Advisor?

Early. A debt advisor should be brought in once the initial goals and priorities of the incumbent generation are understood. These early conversations shape everything that follows, including how succession will be structured.

It’s common for the incoming generation to have limited experience managing debt. This is where a trusted advisor becomes critical, helping to provide financial education, scenario planning, and clarity around what carrying debt actually means for the business long-term.

Key Considerations When Structuring Debt in Succession

• Sustainable YIYO debt levels: What can the business afford to repay over time without compromising growth or resilience?

• Security position: How will loans be secured under the new structure?

• Equity position: What percentage of the business does each party hold post-transition?

• Release of security: Will parents still own land, or is there a plan to release or reduce their exposure?

• Ownership of the trading entity: Who owns and controls the day-to-day operations?

• Compensation strategies: What are the financial arrangements for siblings and retiring parents?

• Bank implications: How will second mortgages or cross-collateralisation affect borrowing power?

Succession planning is not just a family discussion — it’s a financial strategy. Sustainable debt planning allows both generations to move forward with confidence, knowing the business is structurally sound and future-ready. Engage early, seek advice, and ensure the numbers support the vision.

If you’re considering succession and need clarity around debt structuring, Sprout’s team is here to guide you through the process.

Why Variable Interest Rates Can Support Succession Planning in Farming Businesses

Last month, we explored the pros and cons of fixing your farm business’s interest rate versus remaining on a variable rate. Since then, the Reserve Bank of Australia (RBA) has announced a further 25 basis point reduction, and based on their latest commentary and meeting minutes, there are indications of a further 50–75 point drop throughout the 2025 calendar year. While not guaranteed, this potential downward trend reinforces the case for interest rate flexibility.

In our previous newsletter, we highlighted how a variable interest rate can offer greater flexibility, particularly useful in dynamic situations like succession planning. In this month’s piece, we’ll unpack exactly why that is, and how maintaining a variable rate can better support farming families as they navigate intergenerational business transitions.

Why Variable Rates Matter in Succession Planning

Succession planning often involves major structural changes to a family’s financial and operational arrangements. This can include:

• A change in business entity 
• The introduction of new debt 
• A shift in decision-making and financial strategy as the next generation steps up 

More often than not, the incoming generation will want to work with their own professional advisors and, at times, a new banking partner. If the business has fixed-rate loans in place, this can lead to challenges such as break costs or reduced flexibility when restructuring.

Sprout Ag is also observing significant shifts across the banking sector, from pricing to appetite for rural lending, making it all the more important for families to maintain optionality.

The Three Big Questions in Succession

Every family navigating transition planning typically has to answer these three questions:

1. How much does the outgoing generation need for retirement? 
2. What level of debt is sustainable for the incoming generation? 
3. What is a fair and appropriate financial outcome for non-operating family members? 

There’s no universal formula for getting this right. The answers depend on family values, business history, and individual goals. But one thing is consistent: these decisions are significant, often life-changing, and usually involve some form of debt restructuring, where loan flexibility can make a real difference.

Fixed Rates Can Limit Strategic Options

Fixed loans can create friction during succession for several reasons:

• Break Costs: If a fixed loan needs to be paid out early to enable restructuring, break costs may apply, adding unnecessary pressure to the process. 
• Bank Compatibility: The existing bank may not support the next generation’s plans, requiring a shift in providers. 
• Loss of Leverage: Fixed-rate products can reduce the business’s ability to pivot or negotiate on terms. 
• Misalignment: A new generation may want to bring in their own team, strategy, or financial partners—something that can be limited by legacy loan structures. 

So—Should You Never Fix?

Not necessarily.

There are times when fixed rates make sense, particularly when forecasting and managing cashflow in a stable business phase. But when your farming business is facing change, such as succession, it’s worth carefully considering the role of flexibility.

If you’d like to explore how your current lending structure aligns with your long-term goals or succession plans, the Sprout Ag team is here to help.

Let’s chat.