Banks have a range of products that can help New Zealand farmers keep their farm up and running as it should. One such product is seasonal finance, a type of loan that works for farmers rather than against them.
What is seasonal finance?
Seasonal finance refers to a loan or a line of credit that is only repaid in months you’re earning a return on your harvest. This usually means farmers make fewer repayments per year but those payments are larger in amount.
When farmers are not making repayments, the loan or line of credit serves as an alternative source of cashflow to cover ongoing farm operational expenses.
Seasonal finance also usually allows farmers to make as many additional repayments as they want, to take advantage of seasons when they are receiving income from buyers. Some banks also offer seasonal finance with no early repayment fees, so there is no penalty if a farm is able to pay off the lump sum of their loan at once.
This is a good system for both farmers and banks because it keeps the farm’s finance in sync with its real cashflow patterns, decreasing the risk that the farm might default on the loan.
Seasonal finance can have several benefits:
- Convenience of deferring farm input costs to a season when cash is coming in
- Quick and easy application process
- Line of credit may run for a set time period, e.g. a term of up to 12 months
- Interest may be debited monthly from the farm account
- Unlimited extra repayments allowed
- No early repayment fees
Does your bank offer seasonal finance?
In 2016, CANSTAR has researched and rated five different providers of agribusiness solutions in New Zealand, and ANZ Bank has won our 2016 Award for Bank of the Year – Agribusiness. ANZ is one institution that offers seasonal finance for farmers.
Does your bank measure up? Read the award report and find out.