Our Insights

Coronavirus - Farm Finance Check

Mar 27, 2020 9:45:00 AM / by Scott Wishart

There's a lot of uncertainties at the moment, but our job is to assist you in ensuring that your finance isn't one of them. To our clients, you'll be getting a call from us in the next couple of days so we can check in to see if there's anything else we can be doing to help you.

We might be working remotely along with the rest of the nation, but we are fully operational fully committed to supporting you as we navigate through this.


What's your plan of attack?

Our advice is simple: control the controllable.. That means getting on the front foot and assessing any impacts to your business, its supply chains and consequently, any impacts on your finance. Bankers are going to be under the pump, so we need to help them serve you well by giving them quality information and giving it to them in advance of it being urgently required.


So alongside our existing client work, our focus for the next month is to conduct the NZAB Farm Finance Check with all of our clients involving five simple steps:


Step 1) Revise all cashflow forecasts for the remainder of the FY20 season. Are there any changes to previous assumptions? Delays in stock moving through the works? Issues with labour? You need to know where you are going to land at the end of the season so we can plan for next.


Step 2) Revisit the plan for next season. Revise any cashflows to ensure they still represent the most likely outcome.


Step 3) Undertake sensitivity analysis on working capital requirements - to ensure there is a sufficient buffer allowed for. What does the 'worst case' look like? What funding package do you need to be able to operate under that scenario, and what will the bank want you to do in order to access that?


Step 4) Review all loan facilities. What's expiring before the end of next season? What are the principal repayment expectations? As far as the bank is concerned, how has your risk profile changed? What are the impacts on interest rates?


Step 5) Hedging check in. Interest rates, payouts, inputs etc. What policies are in place and how can you use them to minimise risk and uncertainty.


Why are we focusing on farm finance?

Historically we know credit markets can get difficult in times of recession and this will likely be no different. Our industry is performing really well at present with good export results, but credit markets are very sensitive to uncertainty. We need to be vigilant as access to credit will get harder.    

The key is to get ahead of the curve - plan and be prepared. The sooner you take action, the sooner you can take more control of any situation as it changes.


Exact impacts are not yet clear, but demand for credit will increase as businesses of all types seek to survive. This is likely to have flow on impacts in the Agri sector- whether it be less buying power of the people that buy our Agri commodities or less desire from investors looking to place capital in debt markets.


The best way to manage these risks is to not be exposed to them, and front foot them before they become bigger.

To use a rugby analogy, it's what you do when you haven't got the ball that counts, so lets make sure we are best positioned to take advantage of opportunities that are likely to come our way.


Now is not the time to sit back, it is the time to get ahead of the game. Please feel free to share this with anyone you think needs it. 

Tags: Debt, Coronavirus, Action, Planning, Budget, Agriculture, Banking, Covid-19, Strategy

Scott Wishart

Written by Scott Wishart

Managing Director and Co-Founder of NZAB