Business loans for farmers and agribusiness

HomeSec lends against rural and agricultural property for business purposes, from $20,000 to $5,000,000, with no financial statements, no valuation and an open term. Funding in as little as 24 hours and no repayments for the first six months suit an income that arrives once a year rather than once a month.

The cash cycle you are actually borrowing against

Farming has the most extreme cash shape in Australian business: costs are continuous and income is annual. Seed, fertiliser, chemical, fuel and contractor costs are incurred and paid across the growing season. The cheque arrives after harvest, after the sale yards, after shearing, or after the processor settles — once, or at best a few times, in a year. In between, the business funds itself.

Weather sits on top of that and is not a risk that can be planned away. A dry spring, a wet harvest, a frost, a flood or a fire can move a year's income by more than the whole year's profit, and the costs of the failed season have already been spent. The season after a bad one is the hardest, because inputs for the recovery have to be bought with money the failed season did not produce.

Input pricing has its own timing problem. Fertiliser and chemical are cheapest and most available when bought early, which is exactly when the previous season's proceeds are furthest away. Farmers who can buy inputs in advance consistently pay less for them, and the constraint on doing so is almost never the price — it is the cash.

What makes the phone ring

What you can offer as security

Rural and agricultural property is accepted as security, as a first or second mortgage. So is a home in town, an investment property, or a block held separately from the farm, and several can be combined on one loan.

Two things about rural security are worth stating plainly. LVRs are lower on large acreage than on a suburban house, because a large holding takes longer to sell and the buyer pool is smaller — the ceiling depends on the property, and a Lending Manager will give you the figure on the first call rather than a blanket number. And a property in a very small or single-industry market is assessed on its own merits rather than against a postcode rule.

Livestock, plant, standing crop and grain in storage are not security here. They are frequently already under a facility, and their value moves with the season. The land is what supports the loan.

How much you can borrow

Take the property's value, multiply by 80% for residential security or 70% for commercial, and subtract what is already owing on it. What is left is roughly what is available, between $20,000 and $5,000,000. Several properties can be added together, and the borrower does not have to be the owner — companies, trusts and sole traders — including start-ups, with everyone on title signing. Up to 80% on residential and 70% on commercial. Lower on large acreage, and LVRs may reduce on properties worth less than $800,000.

Why the bank is slow here, and we are not

Agricultural lending at a bank is a specialist process that runs on farm budgets, historical production data, a valuation by a rural valuer and, often, an annual review. It is thorough and it is slow, and it is built around a lending season rather than around the week a machinery breakdown happens.

Serviceability assessed on the last two years is also a poor fit for a business whose income is meant to vary. A drought year reads as decline rather than as weather.

We do not order a rural valuation and we do not assess serviceability. We assess the land, the purpose and the exit — the harvest, the sale, the refinance — and the answer comes on the first call.

What the money is used for

• Buying inputs early. Seed, fertiliser, chemical and fuel at the price they are available at, not the price they reach later.
• Restocking and livestock purchase. Buying to the market rather than to the bank account.
• Machinery repair or replacement. Inside the window where it matters.
• Carrying a failed season. Costs already spent, and the next crop still to go in.
• Clearing a tax debt. Paid direct to the ATO from settlement.
• Buying adjoining land. A first mortgage over a commercial or rural purchase, settled to the vendor's timetable.

From the call to the money

What it costs

Priced per file, on the property, the position, the amount and the exit. No rate is published, because a rate with "from" in front of it is the best file's number. How it is priced, and every fee that exists.

Reviewed by Catriona Anderson, General Manager