Watch Your Back - The Banks May be After You

Mon, 26 Aug 2002

Watch Your Back - The Banks May be After You

Dairy farmers are being warned to take immediate action if they feel they are coming under financial pressure from banks. Waikato farm finance specialist Donald Fraser says that when farm gate prices drop, banks will often try to get rid of customers they see as being high risk.

Every time there is a downturn a number of farmers get asked to look elsewhere for finance. The banks use words like non-conforming, high risk, hard-core overdraft, non complying.

Hiding behind the hedge or down the back of the farm is not a solution, says Fraser.

All too often I see farmers who ignore letters from the bank
one client who was under pressure had three months of unopened mail on his desk.

Banks generally do a good job, according to Fraser, but all lending is based on assessed risk and for a number of reasons banks may wish to rid themselves of what they perceive as risky borrowers.

With recent high prices, he says, some farmers have gone into high-cost-high-input farming and may not be able to stay within bank guidelines. This situation may be made worse by substantial monthly hire purchase payments.

Fraser advises farmers in this situation to stay calm and objective because in almost every case realistic solutions can be found.

These may involve setting up a better business structure, a new finance package, non-banking lenders who have a different approach to the level of risk, or perhaps an orderly sell-down that allows farmers to make the most of their equity, says Fraser

The important thing is that farmers should take immediate action to get financial help from qualified professionals, he says.

For further information and comment, contact Donald Fraser on 025-951-170,
email: enquire@fraserfinance.co.nz

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Richard Bentley
436 Holland Rd
RD 4
Hamilton
New Zealand 2021
Ph 7-824-1880
Fax 7-824-1864
Mob 021-18-44-570

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