Banking Advisor: Most dairy farmers don’t fully understand how banks assess credit
A leading financial and banking advisor says he doubts if most dairy farmers fully understand the dynamics of banking.
The Government has announced its long awaited funding package for farmers and growers hit by cyclones and storms in the North Island.
It says the package has been put together with input from the major sector groups such as Beef+LambNZ, DairyNZ and HortNZ.
There are two major components – the first one is aimed at encouraging banks to become more actively involved in helping farmers and growers to get their businesses back on track. To do this, the Government will take 80% of the risk of a loan to a grower or farmer away from the banks. It claims this will allow the banks to offer reduced interest rates and more flexible terms.
However, there is a limit of $10 million and certain criteria apply, one of which is that the borrower meets the lenders’ credit criteria – meaning they are lendable and also viable long term.
In the second part of the package, the Government will lend up to $4 million to a grower or farmer if they cannot get a loan from a bank. However, to quality, the individual must be able to prove that they can get their business back on track and that they can then get a bank loan.
In essence, this is a helping hand to those who may already have a mortgage with a bank but may be deemed a credit risk.
Agriculture Minister Damien O’Connor says the package is the result of working together with affected sectors to identify the most suitable schemes for viable businesses, particularly when dealing with their banks.
Horticulture New Zealand chief executive Nadine Tunley says hopefully the package will provide vital help to businesses across the areas affected by the weather.
LeaderBrand’s chief executive Richard Burke also welcomed the package.
“Businesses like ours provide hundreds-of-thousands of jobs for people in the regions. In our case, we also supply the whole country with healthy, fresh food. Being supported in this way to get on with the recovery is a win-win for everyone involved,” he says.
Questions are being raised about just how good the state of the dairy industry is - especially given that the average farmgate payout for the coming season is set to exceed $10/kgMS.
A leading financial and banking advisor says he doubts if most dairy farmers fully understand the dynamics of banking.
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A former Fonterra executive is the new chair of the Dairy Companies Association of New Zealand (DCANZ).
New Federated Farmers national dairy chair Karl Dean is looking forward to tackling the issues facing the sector.
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