Keep Your Farm Operating: Cash Flow is One of the Biggest Challenges for the Agricultural Sector

We were approached by a farming contractor that supplies trucks and drivers for wheat harvests in Western Australia for finance. As is common in the agricultural sector, contractors do not get paid until 30 days after the harvest is finished. Banks’ commercial loans for operating costs are not always the most affordable solution. However, agribusiness lending options which solve short-term cash flow shortfalls are available.

For this agriculture-based business, we offered a range of financial solutions. From these, they chose two:

1. Finance to keep the equipment operational.
2. Cash to pay their workforce.

In 2018, 46% of drought-affected farmers said they did not feel their banks’ support (*1).

The Importance of Operating Loans for the Agriculture Industry

To keep Australia running, growers, farmers, nurseries, and contractors need to effectively manage their cash flow. Sometimes, outlays are so exhaustive (or unexpected) that a loan must be quickly secured to cover immediate costs.

As mentioned above, some contractors do not receive any payments from their clients until 30 days after the harvest. As harvests can take six to eight weeks, this can delay payment for work by three months.

In the meantime, they had to find a way to cover all their expenses, including:

• Maintenance and servicing of their fleet of trucks.
• Daily costs such as fuel.
• Equipment maintenance.
• Keeping cash available in case of emergency repairs.
• Paying their drivers and workforce.

It is vitally important that businesses in the agriculture industry have access to loans to cover cash flow and operating costs.

Affordable Finance is a Major Hurdle for the Farming Agricultural Sector

Australian farmers manage a variety of risks and challenges every day. From local weather extremes to changing trends in the domestic and global markets – and cash flow.

Everything is planned months (even years) in advance(*2).

Planning this far into the future naturally comes with heightened risks.

• Some seasons have better rainfall than others (some have too much).
• Fluctuations in market prices result in more or less profit than expected.
• Labour availability and wages also change(*3).

Liquid assets can be easily over or under-stated, and businesses can have less cash flow than expected(*4).

Financial stress is further compounded by a lack of access to suitable financial solutions. The University of Canberra conducted research on the Australian farming industry. They discovered that: 

Almost 30% of farmers nationwide say that obtaining affordable finance is a major challenge(*4).

Not only is it a challenge, but it is also impacting how farms operate. Farm contractors regularly wait months before receiving payment for work completed. This leaves them with huge outlays to cover and puts strain on their working capital(*4).

Help with Commercial Agribusiness Lending is Available

Commercial agribusiness lending is a speciality of Trans-Pacific Finance Group.

For almost two decades, we have been matching loans with our clients. We get to know our clients to ensure the products we offer them are precisely what they need.

Our financial solutions have helped hundreds of people across the agriculture industry with:

• Expansions.
• Short-term cash flow.
• Equipment and machinery purchases.
• Increasing and stabilising working capital (liquid funds).
• Refinancing.

Questions about Bank Loans or Financing?

Contact Trans Pacific Finance Group to discuss your financial situation and find out how we can help.

References

*1. Schirmer, J & Brown, K. Supporting Drought Affected Farmers and Communities: Learning From Those Experiencing Drought: Brief Report #1 From the 2018 Regional Wellbeing Survey. University of Canberra. 2019.
*2. Department of Agriculture, Water and the Environment. Snapshot of Australian Agriculture 2022. Australian Government. 2022.
*3. Kelly, C. Australian Farm Workers Entitled to Minimum Wage in Major Industry Shake-Up. The Guardian. 2021.
*4. Peel, D, Schirmer, J & Mylek, M. Farming Challenges & Farmer Wellbeing: 2015 Regional Wellbeing Survey - Farmer Report 1. University of Canberra. 2016.