Raising farm finance in 2021 for acquisition or expansion

"...we saw success where we were involved in the beginning stages and early conversations regarding plans for expansion"

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

    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,
    SproutAg.

     

    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!

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