Just like farming isn’t just any kind of job, farmers don’t use just any kind of banking.
With approximately two thirds of Australia’s land dedicated to farming, it’s no wonder why agriculture is seen to be at the forefront of Australia’s development. Farming is a specialised industry in Australia, just like it is in any country, and as such, it requires a specialised banking products to serve the needs of our farmers. That’s where agribusiness comes in.
What is agribusiness?
In technical terms, agribusiness is the business of agricultural production. In terms of banking and finances, agribusiness refers to the specialised products that banks develop to service the Australian farming industry.
How does agribusiness work?
Banks offer specific products and services for agribusinesses. As these banking products are particular to the agriculture industry, banks usually have agribusiness divisions or teams who work with farming and rural communities. Banks offer different types of agribusiness products including loans, financial packages, money management and investing, risk management, vehicle finance and economic insights. They also offer a range of financial tools to help agribusinesses succeed.
What are the types of products available?
- Loans. Loans for agribusinesses include lines of credit, overdraft facilities, business loans, bill facilities, credit cards, trade finance, livestock leasing and financing advances for your produce.
- Vehicle finance. Many specialised vehicles are used on farms, so there are loans for these vehicles, including hire purchase, finance for vehicles and equipment, and finance for leased vehicles and equipment.
- Banking accounts. These include personal banking accounts that come as part of financial packages, as well as specific farm management or deposit accounts.
- Risk management. These services include commodity risk management, currency risk management and interest rate risk management in the form of insurances, financial planning, and foreign currency expert analysis.
- Home loans. There are also property financing solutions for agribusiness owners, both for residential properties as part of financial packages, and commercial properties.
How do I compare agribusiness?
- Fees. The fees available on the different loan products will contribute significantly to the cost of the product, so remember to take this into consideration. Check if these fees will be one-off or ongoing, and if you will need to pay fees to use any additional features of the product.
- Rates. For loans, such as overdrafts, line of credit, or vehicle finance, you should check the rates offered with the loan product. The rate may be offered as fixed or variable, and you may be given the option of making interest-only repayments during seasonal lows to assist with business cash flow.
- Products and financial packages. Some lenders may allow you to package several of their products together, which is a convenient option, and one that can also result in discounts across that suite of products. Be sure to check the individual costs of these products to see their individual value.
- The lender. As already mentioned, some lenders offer a specialised agribusiness team that can work with you to choose the right products for your agricultural needs. If you’re after a higher level of customer service, then compare your options and choose a lender that is willing to meet your needs.
What are the pros and cons?
- Specialised products. These banking products are designed for farmers, and are suited to meet the needs of those in the agricultural industry.
- Seasonal solutions. As farming is largely a seasonal industry, some of the products accommodate for seasonal changes in cash flow.
- Discounts available. Some lenders offer discounts if you package a range of products together, helping you to save money on your banking.
- Different costs. As these products are specifically designed for farmers, they may come with different rates and costs than those available in the bank’s other range of products.
There are a range of products available, and while they all might seem beneficial to you, you should avoid applying for a product before you know you’ll need it. You should also check how easy it is to talk to your chosen bank or lender before you apply. Most banks understand that agribusiness owners may have limited access to Internet or phones at certain points in rural areas, but you need to be sure that your bank will be contactable when they need to be. Some banks offer mobile banking services with some packages, so this may be worth considering.
Frequently asked questions
What farm equipment and vehicles am I able to finance? This will differ between lenders, but generally it will include tractors, harvesters, utes, and general farming equipment. Check with your lender to see if your equipment or vehicle will be eligible. What kind of financial packages are available? You are able to package various financial products, such as transaction and savings accounts, credit cards, financing solutions and risk management services. Banks may also offer additional services with these packages, such as discounted research and advice services. What size farm do I need to have to access agribusiness products? There is no minimum business size, you just need to be in the agriculture and farming industry.