Be Prepared –  bank blitz next year –  Farm borrowers warned

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Bankers are fishing for borrowers’ business to make up for their huge penalties for misconduct .

Now might be the right time to a little loan fishing yourself. GBAC’s Good Banking Advice Centre, offers you the ability to sound out other banks than the one you are with – as insurance against foreclosure.

We have learned that other banks welcome new customers with open arms, whereas your old bank knows you warts and all and can be less enthusiastic.

Another good alternative might be one of the following:

A government Drought loan might be a good bet to replace an existing bank loan, if you can get it and fund repayments. Limit is $100,000 and it is interest free over 7 years.

Before applying, work out how you will fund the $14,500 annual repayments in bad times. Work out whether you would pay it monthly, quarterly, half-yearly or yearly or after some particular sales.

Even though it is interest-free, it is still repayable debt, so handle with care.

A government infrastructure loan over 20 years @ 2.5% is also a good bet for much the same reasons. Again it is a repayable debt so don’t borrow unless you are sure you can repay it. Every $100,000 you borrow will need $7,500 a year for 20 years including $2,500 interest .

Make sure that any infrastructure you construct will earn you two or three times what the loan repayments will be. A lot of farm money is spent on infrastructure that does not increase profit. I have built fences and dams myself that I thought were brilliant and bound to lift profits but

they made not the slightest impact. That is not to say  that other fences and dams have not paid off, because they have. It is a case of doing the figure work first and checking it afterwards.

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