How to get a livestock loan in Australia to support your business growth

• What other commercial loans do you currently have? The nature and size of any existing loans may affect the type of loan you should apply for. 
• What scale of sheep or cattle farming do you undertake/ are planning to pursue? 
• What phase of growth is your business in? Expansion, rebuild or maintenance?

Depending on your answers to the above, some of the options available are your traditional bank products such as an overdraft, finance from your local livestock agent or specialised livestock finance products. 

At Agrifunder we offer specialised livestock funding, with 100% funding for the purchase price of livestock and flexible security options, that offers you the ability to grow and scale. 

One key detail to point out is the difference between a ‘loan’ or ‘livestock mortgage’ from a bank for livestock versus funding from a livestock finance provider. 

A loan from a bank i.e. access to finance through your overdraft, can be used for a variety of farm operating expenses. A livestock mortgage from a bank is a charge applied over your whole mob and often only advances less than half of the bank’s prescribed value of the animal and the current market value of the livestock. 

Livestock loan providers are not banks and not technically ‘lenders’ that provide ‘loans’. They provide funding for a specific purpose – livestock. The funding is typically for 100% of the value of the livestock which provides you with greater flexibility and cashflow. 

Another key difference is the security aspect between banks and livestock finance providers. 

Banks prefer to take security over land rather than livestock. Livestock loan providers are the opposite of this. Due to the flexibility of livestock finance providers with security it does impact ownership of the livestock. Rather than ownership of the livestock sitting with the producer, it sits with the livestock finance provider. This is recognised through registration on the Personal Property Security Register (PPSR).

However the reality is that unless you finance stock with your own cash you never truly own the livestock (with bank or alternative finance) until the debt owing against it is paid off. This is a key case of opportunity cost when considering your options for financing livestock – how much does the concept of ‘ownership’ mean to your business in the short to medium term as a livestock trader? And how does this affect what finance you choose to use?

Due to the rise in livestock prices and increasingly variable environment over the past decade the use of livestock finance has increased. Whether it is a tough or bumper season there are a number of key features which make it attractive for producers:

• 100% funding for livestock
• Flexible security – use of livestock rather than land for security
• It can be used alongside of your overdraft so that you can use your overdraft for other farm expenses

However not all livestock finance is the same. It will vary between providers. Key things to take note of when examining different providers:

• Is the provider transparent about funding costs i.e. do they claim they are interest free but charge a ‘marketing cost’ that includes livestock funding? (Ultimately there is no such thing as free finance and a cost is a cost no matter how it is labelled) 
• If the provider says there is no finance cost what other costs are involved and how do these add up and compare?
• Is the funding or marketing cost calculated on the original purchase price or end sale price (end finished value of the livestock)? 
• Is the funding rate calculated on an annualised basis or capitalised monthly?
• Is the funding/marketing cost inclusive or exclusive of GST on an invoice or account sale?
• Do they provide an up front simple pricing structure? Or do they provide a headline rate which doesn’t factor in other hidden costs?
• Do they expect you to follow certain marketing rules – or are they independent meaning you can determine who you buy and sell through?
• What term do they offer? How does this impact the overall cost structure? Are there penalties for operating outside of their term?
• Can they provide you with the appropriate level of funding to support your business goals?