When cash starts tightening before harvest, the obvious response can be to find another business loan.
That may solve the immediate problem.
But if the farming business already has equipment finance, an overdraft, ATO debt, a short-term working-capital facility and perhaps debt secured against property, another loan may simply become one more repayment competing for the same seasonal income.
Around St Arnaud, where grain growing, sheep and mixed farming are significant parts of the local agricultural economy, seasonal finance needs can arise even in established businesses.
Before adding another facility, it can be worth understanding the debt already running through the business.
After around 30 years working in finance, one thing we have seen repeatedly at Thrive Broking is that the finance a business has accumulated over time is not always the finance structure it would choose if it were starting again today.
How Does Business Finance Become So Complicated?
Usually, it happens gradually.
A tractor was financed five years ago.
A truck was added later.
An overdraft was established for seasonal costs.
A difficult year resulted in a short-term business loan.
ATO debt developed and a payment arrangement was put in place.
Another equipment purchase was financed with a different lender.
None of those decisions necessarily looked unusual at the time.
But eventually the business can have repayments going in several directions each month.
When another seasonal cash requirement appears, the owner sees the immediate shortage and thinks:
“We need another $100,000.”
The first question should sometimes be:
“What are we already paying?”
Know the Existing Commitments Before Borrowing Again
A useful finance review starts with the current position.
For each business facility, identify:
The balance owing
The regular repayment
The interest rate where available
The remaining term
Whether there is a balloon or residual
What security supports the debt
Whether there are early repayment or exit costs
What the facility was originally used for
This can expose finance that no longer matches the asset or business need it was intended to fund.
It can also show how much cash is leaving the business each month before suppliers, fuel, wages or harvest expenses are considered.
The Repayment Matters as Much as the Balance
Business owners naturally focus on how much they owe.
From a cashflow perspective, the repayment profile can be just as important.
Two businesses may each owe $300,000.
One may have that debt spread across appropriately structured longer-term facilities.
The other may have several short-term loans with substantial weekly or monthly repayments.
The debt balances may look similar while the effect on operating cashflow is completely different.
This is why looking only at total debt can miss the real problem.
When we review a commercial finance position at Thrive Broking, we want to understand what each facility costs the business to carry, when it finishes and what purpose it is serving.
That gives a much clearer picture before another commitment is added.
Short-Term Finance Has a Job, but It Should Not Become Permanent by Accident
Short-term business finance can be useful.
A contractor may have a temporary mobilisation requirement.
A farming business may need to bridge a defined seasonal gap.
An unexpected expense may need to be dealt with quickly.
The problem develops when short-term finance stays in the business much longer than originally intended.
A facility is taken to get through one season.
Harvest income arrives but is needed for suppliers and the next production cycle.
The facility remains.
The following season creates another cash requirement.
Another loan is added.
Eventually the business is using current income to service yesterday’s cashflow shortages.
That deserves a closer look.
If the underlying requirement happens every year, an appropriate seasonal or revolving working-capital structure may be worth considering rather than repeatedly arranging new short-term debt.
When ATO Debt Is Part of the Monthly Cash Drain
ATO debt can make this more complicated.
A farming or contracting business may already be meeting an ATO payment arrangement while also paying equipment loans, business facilities and current operating expenses.
The business may then enter harvest needing more money for fuel, contractors, freight and suppliers.
Taking another loan may provide the cash required today, but the additional repayment remains after the immediate problem has passed.
Where ATO debt is material, we generally want to understand it as part of the overall business position rather than pretend it exists separately from everything else.
Depending on the circumstances, refinancing or restructuring may be worth investigating.
In other cases, leaving the ATO arrangement in place may make more sense.
The point is to compare the options before automatically adding another facility.
Could Unpaid Invoices Be the Real Problem?
For agricultural contractors and transport businesses, the business may have enough work but too much money trapped in unpaid invoices.
That is a different finance problem.
Imagine a contractor has $180,000 owing from commercial customers.
Fuel, wages and subcontractors have already been paid.
Another $70,000 short-term loan might put cash into the account, but the underlying issue is still that revenue is taking too long to convert into available cash.
Where eligible invoices are involved, debtor or invoice finance may be worth examining.
The debtor ledger itself becomes important.
Who owes the money?
How old are the invoices?
Are several customers involved or is most of the ledger concentrated with one debtor?
How regularly are invoices being raised?
In nearly three decades around lending, one lesson is that identifying the actual source of the cashflow problem matters before deciding which finance product should be used to solve it.
Is Business Debt Secured Against Property?
Another area worth checking is security.
Some agricultural businesses have working business debt secured against farm or residential property.
That may be entirely appropriate.
It may also be a structure established years ago because property security was available and the business needed funding quickly.
If another facility is now required, it can be worth understanding exactly what property is supporting the existing debt.
There may be alternatives depending on the applicant, business performance, purpose of the finance and lender appetite.
That does not mean moving debt away from property will automatically result in lower rates or repayments.
Unsecured or differently secured business finance can cost more.
The question is whether the security structure still reflects what the business wants and needs today.
Refinancing Needs More Than a Lower Repayment
A refinance should not be judged simply by whether the new repayment is smaller.
A lower repayment can sometimes be achieved by extending debt over a longer period.
That may improve immediate cashflow while increasing the length of time the business carries the debt.
There may also be establishment costs, exit costs and different security arrangements.
That is why Thrive Broking looks beyond the headline repayment.
A useful comparison should consider the amount being refinanced, the new term, total repayments, fees, security and what the business is trying to achieve.
Sometimes the existing loan should be left exactly where it is.
Sometimes restructuring part of the debt makes sense.
The purpose of the review is to work that out before making the change.
Harvest Income Should Not Have to Solve Every Old Problem
A strong harvest can bring substantial cash into a business.
But that money may already have several jobs.
Suppliers need paying.
ATO commitments remain.
Equipment repayments continue.
The next production cycle needs funding.
Repairs may have accumulated.
The business also needs to retain enough cash to keep operating.
If all harvest income disappears into old debt and the business immediately needs another facility for the next season, something in the funding cycle may need attention.
That is why debt restructuring and working-capital planning should be considered together where appropriate.
The objective is not simply to clear as much debt as possible today.
It is to leave the business with a structure it can realistically operate with tomorrow.
What to Have Ready for a Finance Review
You do not need a perfect set of spreadsheets before having the first conversation.
A useful starting point is:
Current business loan balances
Regular repayments
Equipment finance payouts
ATO debt and payment arrangements
Overdraft or working-capital limits
Property-secured business debt
Recent business turnover
Major unpaid customer invoices
Supplier commitments
The additional amount currently required
What the new funding is actually for
With those details, Thrive Broking can usually start identifying whether the issue is a straightforward new funding requirement or whether the existing structure deserves closer attention.
That can save a business from applying for a product that treats the symptom without dealing with the cause.
Nearly 30 Years in Finance Changes the Questions We Ask
One of the advantages of experience is knowing that the first finance request is not always the real finance problem.
Someone may ask for $80,000 of working capital.
The underlying problem may be $200,000 sitting in debtors.
Someone may ask for another seasonal loan.
The bigger issue may be three existing short-term facilities consuming cash every month.
Someone may want to refinance everything.
After reviewing the numbers, leaving some facilities untouched may actually make more sense.
That is the type of discussion we want to have at Thrive Broking.
The objective is not to find a reason to borrow more.
It is to understand what the business needs the finance to achieve.
Before You Add Another Loan, Let Us Look at What Is Already There
St Arnaud has a strong connection to grain, sheep and mixed farming, and seasonal cashflow is part of operating in an agricultural economy. ABS data shows grain-sheep or grain-beef farming, specialised sheep farming and grain growing among the area’s prominent employment industries.
If your farming, contracting or agricultural transport business around St Arnaud is considering another working-capital or seasonal facility, talk to Thrive Broking before you sign for it.
Bring us the balances and repayments on the facilities you already have, the amount you now need and what that money is intended to fund.
We can look at the existing debt alongside the new requirement and help you assess whether the next step should be additional working capital, debtor finance, refinancing, restructuring or simply leaving some facilities exactly where they are.
Before adding another repayment, make sure you know what problem the new finance is actually solving.