Farms and seasonal producers: funding that waits for harvest

Few businesses face the gap between spend and income as starkly as a farm. Seed, fertiliser, fuel, labour, freight, vet bills and repairs all run for months before a harvest comes off or a mob is sold. Then, perhaps once or twice a year, the money arrives, in a lump, at the mercy of weather and markets. Funding has to be built for that shape.

What squeezes farm and seasonal cash flow?

• Long spend, short earn. Costs run through the growing or production period; income is concentrated at harvest or sale.
• Machinery. Headers, tractors and irrigation gear are expensive and essential.
• Weather and price. Both can change income sharply between years.
• Labour peaks. Seasonal staff are needed exactly when cash is lowest.
• Tax calendars. BAS runs to the usual dates, while income tax planning for variable income is its own subject.

Which funding routes fit?

Pressure	Route	Why it fits
Large land equity	Property-secured loan	Larger amounts, structure freedom
New or replacement machinery	Equipment finance	Machine is the security
Months between spend and harvest	Line of credit	Draw through the season, repay at harvest
Signed supply or offtake contract	Contract funding	Funds costs of delivery
Packer or processor invoices	Invoice-backed funding	Cash earlier than the payment date
Machinery owned outright	Sale and leaseback	Releases capital without losing use

Illustrative example only. A mixed cropping and sheep operation needs to buy inputs in autumn, hire contractors in spring and then wait for harvest and wool sales. A seasonal line of credit sized to that pattern, secured over land, fits better than a flat loan with identical monthly repayments.

What are farm management deposits, and do they replace borrowing?

The ATO describes farm management deposits (FMDs) as deposits held in special accounts offered by selected financial institutions, designed to help primary producers deal with years of varying income. You make tax-deductible deposits in good years and withdraw funds in bad years. Withdraw within 12 months and you generally cannot claim a deduction for that amount, with exceptions that include severe rainfall deficiency, receiving natural disaster recovery assistance, ceasing primary production for 120 days or more, bankruptcy and death. Repayments from deductible deposits are generally treated as assessable income in the year they are withdrawn.

FMDs are a cash buffer, not a loan. They can reduce how much you need to borrow, but they do not replace funding when the gap is bigger than the buffer. Whether they suit you is a matter for your accountant.

What do funders look at on a farm?

• Land and equity. Title, existing mortgages and what the land would realistically be worth.
• Production history. Yields, sales, and how your income has behaved across seasons.
• Contracts and buyers. Forward sales and the reliability of the processor or packer.
• Machinery. Age, condition and what is financed.
• Management. Experience, succession and records.

What do you need to hand over?

1. Title details and existing loan statements.
2. Several years of production and sales records, plus recent bank statements.
3. Forward contracts or offtake agreements.
4. Machinery list and finance details.
5. A seasonal cash-flow outline showing when money goes out and comes in.

If you are planning a season, talk us through the numbers and a specialist will say which pieces to fund and which to self-fund.

What are the traps?

Mismatched repayments. Monthly repayments that ignore the harvest cycle can strain the quiet months.

Over-borrowing against a good year. Seasons vary. Size funding for an average year, not the best.

Weather risk is real. Insurance and buffers matter more than any facility.

Land at stake. Land-secured loans put the farm on the line; the repayment plan has to survive a poor season.

How do you structure a facility around the farm calendar?

Ask the funder to map repayments to your cash events, not to the calendar month. Interest-only periods in the growing season, with larger repayments after harvest or sale, are the common pattern. A revolving facility with a seasonal limit is another. The point is to avoid making repayments when the farm has no income and to ensure the facility is clear, or close to it, after the main sale.

Bring a simple cash-flow outline to the conversation: inputs by month, wages by month, expected sales by month. Funders who work in agriculture read these quickly, and it shows you know your numbers.

How do succession and family arrangements affect funding?

Farms are often held in family structures, with more than one generation involved. A funder needs to know who owns what, who operates the business and who will sign. Trusts, partnerships and company structures all appear. Clear documentation helps, as does being open about future plans, since succession can affect who is responsible for the debt in years to come. Where family members are guaranteeing, each should take independent advice and understand the exposure, as ASIC’s guidance for directors recommends.

When is a different route better?

For general seasonal planning, see seasonal and lumpy income. For machinery, the equipment page covers purchase and refinance. If a bank declined for lack of recent history, funding a new business shows what works.

Is there a route that follows your seasons?

Usually, yes. The enquiry takes about a minute with no credit check, and your details are not blasted at a long list of lenders. A real person reads what you’ve said and calls. Share your cycle, land position and planned spend as accurately as you can, so we match you properly first time. See if you qualify.