Rural property finance wheels spin slower in COVID-19 landscape

The 466 ha of North Avoca in the Maules Creek district near Narrabri are for sale for $ 2 million. Like almost all farms in NSW, its winter harvests are ahead or on schedule after the recent excellent rains. Photo: NSW Rural Property

THE WHEELS on funding approval appear to be spinning slower than normal as banks juggle tight lending parameters and the impacts of drought and COVID-19, with good crop prospects.

The findings of the Royal Commission on Misconduct in Banking, Pensions and Financial Services were released in February last year and tightened lending parameters across sectors.

Additionally, drought has made assessing claims even more complicated, especially in hard-hit areas in the northern half of New South Wales, where some growers have missed three winter harvests in a row.

These growers are now going full steam ahead on a large plantation of winter crops as COVID-19 is impacting the Australian and global economy.

“Finance is different than it was two years ago, when you could make an offer and within three weeks the bank could give you an indication,” Nutrien Harcourts Dubbo agent Mat Smith noted.

“Now you can say it’s eight to ten weeks from now. “

Mr. Smith’s observation was echoed by a number of other Grain Central sources.

Inevitable delays

Grain Central asked ANZ, CBA, NAB, Rabobank and Westpac if rural real estate loan approvals are taking longer in the current climate.

Their responses have been mixed and appear directly below or at the end of this story.

“COVID-19 restrictions in the community have resulted in delays in turnaround times in agricultural banking as an industry,” Rabobank said in its statement.

“This has been the result of a number of factors including restrictions on physical property inspections and security assessments, as well as delays in completing documentation when hard copies and independent witnesses are required. , and the required regulatory identification and verification of clients who had previously been dealt with face to face.

“In some cases, the challenges of working remotely with varying internet speeds can also have an impact.

“In addition, it is a busy time in rural finance with the seasonal peak for funding for the next planting of winter crops, additional funding requests due to the drought recovery and also the preparation for the fiscal year-end planning and payments.

“There are also increased regulatory and compliance requirements for the industry. “

Rabobank said she was dealing with these challenges and her main focus remained to serve and help her clients.

“There is a strong positive outlook for the coming season, with significantly improved seasonal conditions, strong local commodity prices in most sectors as well as an Australian dollar and low interest rates.

“We expect farm profitability to remain positive in most sectors, including grains, this season and the farmland market to remain relatively strong, despite the economic challenges associated with COVID-19.”

In its response, the CBA said that its speed of approval and recovery of funding depended on the quality of the information it received from clients and their financial and accounting advisors.

“A common reason for delays is that we don’t always get the required information we need, which is even more important when clients come out of drought where historical financial data may appear weak,” CBA said.

Alternative credit

Sources told Grain Central that bank customers seek financing elsewhere if their regular lender is unable to take new loans or extend existing loans.

“One of the things you’re going to see in agriculture is alternative sources of credit from second-tier lenders,” said the executive director of Direct Agriculture. Philippe Jarvis noted.

Pastoral houses, dealers and brokers all landed additional business before growers embarked on planting this year’s winter crops.

Mr Jarvis said anyone with a loan-to-value ratio (LVR) of around 70% or more could look beyond their normal source of credit for funding.

“Maybe the bank helped a farmer get through three to five years of drought, and they say they want some of their money back. “

This means that farmers who want to borrow for three to 12 months to buy livestock or invest in other “money-making stuff” like irrigation infrastructure or silos, could turn to parties other than their bank.

“It is a fact that banks will not extend their LVRs. “

Financial benefits

Mr Jarvis said the impact of COVID on financial markets would be seen as countries emerge from the medical emergency phase.

“Uncertainty is a global factor, and because of COVID, the value of certainty and money in the bank is greater than it was before.

“On the other side of the equation, we come back to the fact that everyone has to eat. “

He said the attraction of agricultural investments was stronger than ever.

Mr Jarvis spoke of the Macquarie Bank raising around $ 600 million in funds in 2007 and 2008 for investments in agriculture during and after the global financial crisis.

“It was … because financial investors were nervous about the stock, bond and debt markets, and farmland – real estate with an operational entity sitting on it – is a real asset.”

He predicted that a similar phase could well occur after COVID.

“There will be more money for agriculture.

“We are on a post-COVID trajectory in Australia and New Zealand, and we appear to be ahead of the UK and the US.”

Bank responses


“Turnaround times generally remain unchanged, knowing that customers affected by COVID-19 events are our first priority. Moreover, when conventional practice may be restricted, it may take time to develop an appropriate process and to overcome any complexity. Like always, we encourage customers who have concerns to contact us directly to help us ensure their needs are met.

Agro-food company manager Mark Bennett


“We know that recent rainfall in many areas, coupled with high commodity prices, low interest rates and demand for our Australian fresh produce, means that many farmers are currently seeking loans for their working capital. , whether to plant winter crops or to replenish their stocks. purposes – and we’re committed to supporting those customers and prioritizing their needs.

More broadly in the business world, we have seen a significant demand for working capital from companies that have been affected by the coronavirus pandemic, to help cover critical expenses such as salaries, supplier payments and other overhead costs – and we’ve worked around that to help as many of our corporate clients as possible meet these current challenges. “

– Responsible for the regional and agro-food bank Grant Cairns


The Commonwealth Bank is a strong and secure financial institution. The bank is well capitalized and has more than sufficient liquidity.

We have seen a significant increase in the volume of loan applications, across various sectors and industries.

One of the ways we support businesses is through funding through the federal government backed SME Guarantee Program. Through this program, we support new and existing clients with loans of up to $ 250,000 for a period of three years, with all repayments deferred for the first six months. Over the past month, the CBA approved more than $ 400 million in SME guarantee loans to help Australian businesses.

While we do our utmost to provide funds promptly to our clients, the timing will vary for each client, depending on their personal circumstances. For example, the time between applying for a loan and approving funding depends on various factors including the structure and complexity of the business, the type of information we already have on this client, the credit checks that must be completed and the time it takes customers to return the signed documentation to us.

Our timeliness of funding approval / execution also depends on the quality of the information we receive from our clients and their financial advisors / accountants (a common reason for delays is that we do not always receive the required information that we have. need, which is even more important when clients are emerging from drought where historical financial data may appear weak).

We know that many agri-food customers have experienced good rainfall and want immediate access to capital to rebuild themselves after the effects of the drought, and we are committed to supporting our customers and the Australian agriculture industry.

The current coronavirus restrictions have impacted millions of businesses and our priority right now is to support as many of our customers as possible during this difficult time.


“As Australia’s largest agricultural lender, we remain open for business.

These are exceptionally difficult circumstances and we remain committed to supporting our clients. We have seen an increase in demand for financing through COVID-19 and our bankers are working hard to support clients who have had access to a range of supports, including interest deferrals and loans to support clients. companies.

Our bankers are work with clients who are well prepared and have strong relationships with their bankers to help them provide funding. We encourage clients to speak to their local banker to work on their individual situation. “


“We have had strong demand for our relief packages for businesses and households, which has caused delays in other parts of our operations. We have redirected employees to the apps and have now processed the majority of mortgage deferral requests. We will endeavor to continue to process these requests as expeditiously as possible and to manage other departments efficiently, including prioritizing buying and selling activities. We apologize to customers who experienced delays and thank them for their understanding as we work to help everyone as quickly as possible. Westpac has not changed its approach to the rural real estate market. We remain committed to rural and remote Australia. We are definitely still open for business.

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