Funding a farm through a bad season: a planning guide for the next twelve months

A bad season changes the conversation with every lender you deal with. The bank that happily extended your overdraft last year now wants to see a plan. Suppliers tighten their terms. The accountant warns that the tax return will show a loss. Meanwhile the farm still needs fuel, feed, seed, fertiliser, wages and repairs, and the next income might be months away.

This guide is a twelve-month plan for getting through it. It’s written for Australian primary producers who have been knocked around by drought, flood, fire, frost or a price slump, and who want to keep the farm moving without making the debt problem worse.

Step 1: Map the next twelve months of cash

Before talking to any lender, sit down with your bookkeeper or accountant and build a simple month-by-month cash map:

Month	Money in	Money out	Running balance
Each month	Expected sales, contracts, government support, other income	Inputs, fuel, feed, wages, repayments, rates, insurance, tax	Opening balance plus in, minus out

Be honest about both columns. Use conservative yields and prices, not best-case ones. Include every existing loan repayment. The lowest point in the running balance is the size of your problem, and the month it happens is your deadline.

Our cash gap calculator does a simplified six-month version of this if you want a quick first look.

Step 2: Get free, independent help early

The Rural Financial Counselling Service provides free, confidential support to eligible farmers and small rural businesses facing financial hardship. Counsellors can help you understand your position, prepare cash flow budgets, get ready for meetings with lenders and explore options you might not have considered. They’re independent of lenders, including us.

If debt is already a real concern, call them before you sign anything new. It costs nothing, and a counsellor in the room can change the tone of a bank meeting.

Step 3: Have a frank conversation with your bank

Your rural bank knows farming, and in many cases it’s still your best long-term partner. Go in with your cash map and ask directly:

• What is your position on our current facilities over the next twelve months?
• What would you need to see to increase or restructure them?
• Would you consider a temporary arrangement, such as interest-only for a period?
• Would you consent to another lender taking a second-ranking position, or would you prefer we use separate security?
• What’s your timeline for a decision?

Write down the answers. Even a no is useful, because it tells you exactly where a private lender would fit.

Several states also run farm debt mediation schemes, which can apply before a lender takes enforcement action on farm debt. A rural financial counsellor can explain whether and how they apply to you.

Step 4: Check government support and concessional loans

The Regional Investment Corporation offers concessional loans to eligible farm businesses, including for drought recovery. There are eligibility criteria, and applications take time to assess, so check early. Depending on the event, state governments may also offer disaster grants or support for affected producers.

These options generally cost less than private finance. If you’re eligible, they should be part of the plan. Private finance can sometimes bridge the gap while a concessional loan is being assessed, but it shouldn’t replace support you’re entitled to.

Step 5: Decide what short-term finance needs to do

If there’s still a gap after all of the above, short-term private finance can bridge it. Be clear about the job:

Job	Typical structure
Plant a crop after rain	Short-term loan repaid from harvest
Feed stock through to a sale	Bridging loan repaid from the sale
Replace a machine mid-season	Equipment finance on the machine
Clear a tax or supplier debt	Property-secured loan, often with a second mortgage
Buy a neighbouring block before you sell another	Bridging loan between the two settlements

See short-term and bridging finance and farm business loans for more on each.

Step 6: Choose the right security

Farmland can be good security, but private lenders assess rural property case by case: location, size, water, improvements and how readily it could be sold all matter. Sometimes another property makes the deal simpler:

• A house in a nearby town
• An investment property owned by the family
• A residential block or lifestyle property

Using separate security can mean the bank’s first mortgage over the farm stays exactly as it is, which removes the need for consent and keeps the bank relationship simpler.

Step 7: Document the exit

A private lender will want evidence of how the loan will be repaid. For a farm, the strongest exits include:

• Forward contracts for grain, wool or livestock
• Yield history for the paddocks being planted
• Current stock numbers and recent sale prices
• A signed contract of sale for land or assets
• A conditional approval for a refinance or concessional loan

The more concrete the exit, the better the terms and the faster the approval.

Step 8: Build a buffer into the plan

Seasons rarely go exactly to plan. Build a margin into both the amount and the term. A loan that needs to be repaid the week after harvest leaves no room for a late harvest, a quality downgrade or a buyer who pays slowly. A few extra weeks or months on the term usually costs little compared with an extension or a default.

An illustrative plan

Here’s how the steps might look for an illustrative grain and cattle operation in the Western Downs after a dry year:

1. Cash map: shows a shortfall of about $230,000 between May and December, with harvest income from late November.
2. Rural financial counsellor: helps prepare budgets and attends the bank meeting.
3. Bank: won’t increase limits until next year’s result but agrees to interest-only on the term loan for six months.
4. Concessional loan: the family applies, but assessment will take several months.
5. Short-term need: about $180,000 for planting and feed until harvest, after the bank’s interest-only relief.
6. Security: a house the family owns in town, keeping the bank’s position over the farm untouched.
7. Exit: forward contracts for part of the crop plus yield history.
8. Buffer: a ten-month term instead of seven.

Every farm is different, and this is illustrative only. But the order matters: plan, support, bank, government, then private finance for what’s left.

When borrowing isn’t the answer

If the cash map shows the farm can’t meet its commitments even in a normal season, more borrowing may only delay hard decisions. That’s the moment for a deep conversation with your accountant, a rural financial counsellor and your family about the options, including restructuring, selling part of the operation or other changes. We’ll tell you honestly if we think a loan would make things worse.

Talk to us about your season

If you’ve done the planning and there’s still a gap to bridge, tell us what you need. There’s no credit check when you first enquire, your details aren’t passed around to a stack of lenders, and a real person who understands farm finance will call you to talk through security and exit. Please be accurate about the property, existing bank debt and your expected harvest or sale on the form so we can match you properly. See if you qualify.