Latest / Dollars In The Dirt / #013 - How To Use Finance To Actually Grow Your Farm [Full Breakdown]

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#013 - How To Use Finance To Actually Grow Your Farm [Full Breakdown] · Dollars In The Dirt

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One of the biggest handbrakes on a growing farm isn't the quality of
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the land or the skill of the operator, it's the finance. Most
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producers are sitting on a massive untapped asset that
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could fund their next expansion, but they don't even know how to access
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it. To break down exactly how this works, I'm joined by Richard
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Brimelcomb, CEO of Legacy Livestock. Before
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this, he was the founding CEO of StockCo Australia, where
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he helped fund the purchase of over $1.4 billion worth
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of cattle and sheep across more than 1,500 producers. He's
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also held senior roles at CBA, Suncorp and Landmark, and
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grew up on a grazing property in southern Queensland. In this episode, Richard
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and I are going to break down how livestock finance works, how you
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can use it to grow your operation, and the biggest mistakes to
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avoid. Welcome to Dollars in the Dirt, Richard. Richard,
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what is the difference about livestock lending compared to your
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traditional bank lending? Where do you see the difference in
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Yeah, I think livestock lending, in
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some ways, is the inverse of traditional bank lending. So when
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you've got a term loan from a bank, you want to take a conservative approach.
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You want to be very clear about serviceability over
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a long run through a number of different seasons. And
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the absolute worst case scenario is if you're selling the family farm to
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recover the loan. So you want to be cautious. You want to be conservative. And
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you want to be careful. And I think that's important. On
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the flip side of that coin is if you've got a progressive farming family who
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are looking to grow, they're looking to provide a bigger asset to share
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amongst the next generation that's coming through, sometimes
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that approach can be quite restrictive for them, particularly if their appetite
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for risk is a little higher, despite the fact that they might have a good business.
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And so livestock finance is the inverse in
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the sense that we're going to agree to fund an asset. And
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the primary way out is the sale of the asset that we're
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funding. So that's why I say it's the inverse of bank
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lending. So it really is asset backed financing, but
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it's really a means to helping good
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quality farming families accelerate the growth rate in their business. So they
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can, if they've got a property, they have a good relationship with
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the bank, they're well supported by the bank, but they can't quite get
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enough working capital to fully utilise the productive capacity of
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the property. that's where a livestock financier can come in without disrupting
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the banking relationship and offer additional working capital
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Yeah, and how does livestock funding work? Like, you know, can
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you explain basically how you
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guys fund the cattle and or the sheep
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or, you know, and how does that, you know, mechanically work
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Yeah. So from a livestock producer's perspective, Brecon, essentially
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we're providing an overarching finance limit. So let's
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call it $500,000. And once that limit's documented and
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put in place, generally speaking, the only security will be PPSR
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or personal property security registrations over
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cattle or livestock only. And once those registrations are
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in place, we're able to start funding clients
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after we've documented the facility. And the way it
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works is the client purchases the stock, they send us the
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invoice, and we will settle that invoice directly with the vendor or
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the vendor's agent in full and draw
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a loan against the client's facility or the producer's facility to
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settle that invoice. And then if it's trading stock, that
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facility or that loan will run until the
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stock is sold. And then when the stock is sold, the proceeds come in
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and they're used to repay that loan. If it's breeding stock,
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then there might be monthly interest payable and then quarterly or
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Yeah. And so you guys will fund all sorts of stock. So
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tell me about the type of livestock that Legacy's prepared
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Yeah, sure. So we fund a really broad
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range of stock and the stock we fund is really determined by
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our clients. So we try not to be restrictive in
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our pricing. our approach. So what we're interested in is backing good quality operators
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that are running good businesses and good assets. And then we
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back their judgment regarding stock class. So if
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they're running a backgrounding operation and they're funding backgrounders, that's really easy.
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But if they see an opportunity in the market to switch to a cow
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and calf trade, for example, and split the cow and the calf and sell
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the calf separately as a wiener and and go around again with the cow or
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sell her as a fat. We're happy to do that.
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We can accommodate that. If clients wanting
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to switch into a heifer trade and join
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them and sell them as P-ticks, we can do that. So really,
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we let the clients drive the trade. We back their judgment. And
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what we find is that our money flows to where
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the best risk adjusted returns are in the context of
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each client. So they're assessing the risk, they're making the decision about
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Yeah. So effectively you're just giving them the capital to grow their business. That's
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the way that I see the livestock funding model
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helping, you know, growing businesses. Yeah. And tell
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me like, you know, examples where you've seen businesses
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be turned around, like with the assistant of a livestock, you know,
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personally in my finance business, I've seen a lot of businesses that
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have, you know, probably struggled for that capital to, you know, they've got
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the season, they've got the grass, they see the opportunity in the market,
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but They just don't have the funding to take advantage
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of it. And you'd have a lot more examples of that than I would, but tell
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Yeah. So look, typically we're only funding good
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quality producers that have got good relationships with their bank, but
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can't quite get the flexibility or the quantum of dollars from
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the bank that they need to optimize their business. But we've got a couple
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of really good examples of people that have really been
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breaking even, just struggling for a very long time. The bank's
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very well secured. They're comfortable. They're not giving them any more money. And
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so they're not able to break out of that kind of break-even
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position they're in. And the only thing
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that's missing is some extra capital to utilize that
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unused capacity in their business. And so we've come in, and
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there's a couple of really good examples since we've been up and running where we've
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provided funding on top of the bank capital for
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people to dramatically increase numbers, it might be that
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they've had a really favourable season and they want to make the most of it, or
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that they have simply been operating well under the
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carrying capacity of the property for no other reason than access
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to capital. We've provided that capital. The income has
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significantly lifted on the back of that. People have made good quality decisions.
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They've bought good They've made good trades, they've made good profits on
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the back of using our capital, and they've rolled that through. Unfortunately
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for us, and it's a bit bittersweet, but two years down the track, the
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bank is looking at their numbers and going, gee, you guys are shooting the lights out. We'll give
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you some more money now, and we get replaced. It's
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bittersweet, but we're actually cheering those clients on
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because we've actually helped them get to a different place, and that's where someone
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like yourself, with your business can actually step in and actually
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Yeah, and that's success is if you can get those help those people to become a
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lot more profitable and they can grow and you know eventually they
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might come back and buy another property and they need your assistance again like I
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think that's a fantastic story and I know personally I've got
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clients that look at the assistance that the livestock funders
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have provided to actually turn their businesses around and get them
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into a lot better position. Often the banks don't probably
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view the livestock funders, they often want to take them out as
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quickly as they can. I have a different view. I think it's like
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as we just talked about that really the livestock funding complements
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the banks and makes the client overall a system to be
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more profitable. Where do you see the relationship between the
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Yeah, so look, I think we are somewhat misunderstood by the banks.
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And I think your average banker kind of views us as a competitor
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that they just want to get out of the way. And
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we are never going to compete with the bank. We don't do overdrafts. We don't do term loans.
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We don't write equipment finance, those sorts of things. And we have no desire
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to. We're very clear about what we do. We think we're pretty good
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at it. And so we're very focused on the livestock piece.
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And we have structured our business in such a way that we don't
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take mortgages. We take a PPSR security over
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the livestock only. We're not disrupting
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the security relationship that the client has with the bank. So we
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don't want to disrupt that relationship. We respect that relationship. But
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certainly, we think that there's a valid place for us to be there. And we've got
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some very, very high quality clients, very low levels of
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gearing. The bank could be funding what we're funding. But they're
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clients who are looking to acquire another property in the near future. They're
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wanting to keep their powder dry with the bank. And in the meantime, they're
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using us to maximize the turnover from their business and the
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Yeah, I think that's a really good point. And I often get asked
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the question from younger producers, like, how do we get a start in
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the... Because, you know, properties are worth so much these days and it's
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just hard to get that deposit together to
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buy a property. Tell me, I
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think that you can use the livestock funding as
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a way of leveraging the existing herd potentially. Where
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do you see that from a young producer's perspective trying to get started in
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the industry? How can Legacy potentially
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help those sorts of producers to get started and to build a herd to then use
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Yeah, I think it's a great question because one of the big challenges for
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young people in ag is if I haven't been born into it, how do I get into it?
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And we're actually working with a young couple at the moment on
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this exact same issue. They've worked really, really hard. They've
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actually got a deposit together to get
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into their first property, but the bank won't give them any capital to
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buy any livestock. And so we will come in,
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the bank will have the first mortgage. We won't take any security over the
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property. We'll provide funding for the stock and we'll get the cash turning
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and the cash flowing in their business. Now, because they're a young couple and
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they're starting out, they've actually got external income to service the bank
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debt on the property. And the stock debt will essentially service
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itself. It'll be self-servicing as they turn the stock over. generate the
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profit. So we only ask for trading stock for
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the principal to be repaid when the stock is sold. So
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you're not having to meet a repayment out of cashflow in the meantime. And I think
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that for a young person, you know, whose cashflow is
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poor, but good at what they do and has
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proven themselves, you know, livestock financing is
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a good way to get the numbers building and then reinvest the
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profit in more stock and keep building those numbers until you get to a point where you can
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say, well, actually, I can sell down some of these stock potentially
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to fund a deposit on another block or simply
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go and lease a block or just a block, get the cash flow up, get
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Yeah. The other way to look at that also, I think, is like in the
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past, you and I have done some work together around people that
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have got big herds and then looking to
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expand and buy land, extracting that equity out of
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the herd to use as a deposit for a land
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acquisition. Tell me, is that
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a common thing you've seen in the market or you guys have been part
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of those sort of transactions where someone's got a big livestock herd, they're
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short on equity in terms of cash or deposit for
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a property purchase. How do you see that working where
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we could use that herd to extract some cash to make that purchase?
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Yeah, we think it's counterintuitive if you've established a
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herd to then have to sell. It takes so long to build
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the genetics, to build the numbers. You've got something that's in
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a joining cycle, everything fits your business. We
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think it's counterintuitive to have to sell that down to come up with the money
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to buy a property. And then immediately you've got an income hole because you've
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sold that stock down. There
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have been a number of occasions where we've actually advanced against stock already
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owned, which has been sufficient to get a client a
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deposit on another property that the bank has funded. But
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they haven't actually foregone the momentum of the cash flow,
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because they've still got all of their stock flowing through. And there's been some really good
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case studies that we've been involved in, and some with where
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clients have been able to acquire another property without diminishing future
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earning capacity as a consequence of us advancing against stock. And
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Yeah, I think it's the cost of putting that all together is massive. To
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get the herd together, to then go and deplete
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it to then start again to rebuild it just doesn't make any sense. And I
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think from a traditional bank funding point of view, the banks
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don't really like, they look at their stock mortgage and
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they extend the value on the stock mortgage, but they don't think,
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well, you know, can we use that to to
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then help them grow their business, which is, you know, I think you guys play
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a really big part and it's probably something that people need to, it's a
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bit different thinking to what traditional bank manager and a
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bank manager is not going to put this to you and say, how about you talk to
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these guys. You sort of need someone to bring that together to make that
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deal happen and using a few different finances to make it happen. But
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tell me, The traps, like there's
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obviously, we talk about all the positive stuff here, but there's also,
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you know, and I've been, trades don't always
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go as expected and people often say to me, you know, well, what happens if
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the cattle market drops or it doesn't rain or, you
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know, agriculture is such a, there's so many variables and
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risks involved. Tell me from a livestock funders
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point of view, when things don't go as expected, you know,
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how does that often play out and tell me your experience in that space as well.
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Yeah. And look, if you cast your mind back to,
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say, mid-22, the market was near an all-time high.
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The catalytic mark was at a near-time high. And
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seasons were pretty good. The outlook was good. And
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the market came off. And then the forecast started to
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suggest an extended dry, and the market came off further. And so we
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actually saw the biggest fall in the equi in its history. It's about
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70% in about a six-month period. So we had a number of customers that
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had bought stock. had added value through weight gain, but
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were either just breaking even or were actually trading at a
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loss. Now our view is with those customers, if they're fundamentally of
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good character, they've got good equity in their overall business
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operation, they're good managers, the circumstances that
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have arisen is through no fault of their own. It's a market-related thing.
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They've been communicative with us. They've kept the communication lines
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open. The sensible thing we can do in that situation is work with those
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good quality clients and take that loss, put it to one side, and
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get them back into the market at a very low level. Because in
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all probability, there is going to be upside, and you'll pick it up.
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Now, what we find is that the losses, they
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tend to be minimal, because there's been this offset from weight gain in that
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scenario. And our analysis indicates that,
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essentially, even if the market falls 40% in
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the course of a normal, say, background of trade over six to nine months, you
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are still probably going to make a small profit or break even after paying interest
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to your livestock funder. So there's got to be, if you're a good operator and
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you've got good quality pasture and you've bought reasonable quality stock,
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things have got to go really bad for it not to work out. Now, having said
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that, I think The issue with debt is
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amplification. So debt amplifies outcomes.
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And so if things are going your way, it amplifies the
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profit. If things are going against you, it will amplify
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the loss. And this is why we do tend
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to focus on well-established farming families that have got sound equity in
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their property and are good managers, because it
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makes it very easy for us to be supportive in difficult times and
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help them through to the better times. Trade through. Yeah. So we do
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think about it as somewhat of a cycle, and we tend to look through the cycle and
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try and position ourselves to work through those difficult times in
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And the character piece obviously has a massive impact on that. If
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people are prepared to work with you guys, you guys, I'm
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sure, are happy to work along with them also.
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And probably from my experience, The
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people buying the small stock and growing them out often seem to
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get through. It's when you buy those, you know, the PDICs and trying
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to grow them out and sell them as a cow and calf is where I've
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seen the big issues happen. So do you agree with
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that? Is that that's sort of when you're buying that more expensive article?
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and trying to trade into another class, that's where often
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It can be. I mean, the context is different for every trade and for
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every individual. But I think if your trade
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is longer term, and you're sort of trying to trade across classes, then
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you introduce new risk. And you're introducing what we would call
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tenor risk. So the longer you are exposed to the market, the greater the
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probability that you might you might encounter something adverse in the
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market. So if you're engaging in shorter term trades, you're
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less likely to be impacted or materially impacted by
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that market risk. So, you know, look, we leave those
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decisions to our clients because they know what's best for their operation. But,
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you know, I think as a rule of thumb, you know,
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those longer term complex trades carry more risk. Yeah,
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Changing gears a bit, so back to the younger farmers. As
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a younger producer starting out, what are your thoughts around
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how they should get started in the industry? You've had a long history
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in the finance and agricultural industry. I'm
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just interested in your perspective on ... I get asked a
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lot of ... Every week, people are asking, how do we get started
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in this industry? We love it. It just seems like it's
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so out of reach to be able to get started as a young person in
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ag if you're not born into it. So I'm interested
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in your thoughts on what do you think a young producer starting
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out should look to do and how to grow to get to a
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Firstly, it's a long road. And so you've
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got to have a lot of perseverance and resilience about you. You've
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really got to want it. And you've got to be prepared to see some
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pretty tough times on the way through. But I
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think it's about a series of steps in a plan to
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get to a different place. And so if you've
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got some sort of income earning capacity, it might be you're
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working off farm, or you've working
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in a mine, you're working in a local engineering shop, whatever it
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is, if you've got some external income and you've got
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some savings behind you, you can potentially get
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some adjustment, get a lease block, get some stock flowing, start
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to get some cash flowing and build some equity in your livestock and
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then progressively over time leverage that
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and get yourself to a point where you've built the cash flow, then
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you can start to save some cash and get some cash behind
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you progressively to get you into your first place. And I think
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young people who are moving forward quickly tend
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to have got themselves into their first place. It may not be a big
19:52
place. It's manageable for them. And then they're leveraging
19:56
that infrastructure that they're slowly building by adjusting or
20:00
leasing some more country, pushing their return up by
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getting that leverage of adjustment or leasing, and then starting to
20:08
use an organization like Legacy to actually start financing
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the cattle on that lease block or adjustment block and leveraging it up. It's
20:15
just lots and lots of little steps. And sometimes it'll be three
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steps down and four steps forward. And as
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I often say, unfortunately, when you get
20:26
a shock, it's often down by the elevator and up by the stairs. So you'll
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take a shock, and you'll take five steps back. And then it'll take a long time to
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progressively get back to where you were and then move ahead. So you've just got to have that. You've
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got to recognize that that's what you're in for and be prepared to work
20:43
I take out of that, that cashflow is probably the key to when
20:47
you peel it all back. If you're a young producer starting out,
20:51
cashflow is probably the number one thing you need to
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really, so having an off-farm job and then the
20:57
next thing is getting some sort of asset behind you, so buying a
21:00
house and to get a livestock funder. to
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assist a young person to grow their business, one
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of your criteria is owning an asset of some sort. And
21:11
so tell me, if I don't own a house, if I've
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got a good job, I want to buy a mob of cows, is
21:21
the opportunity there to get a parent to
21:24
be guarantor? How do you guys view that sort of guarantees and that sort
21:29
Yeah, so look, it is part of our credit criteria that
21:33
either a borrower or someone that's guaranteeing the borrowing
21:36
does have some equity in real estate. And that's really about
21:40
ensuring that there is some skin in the game. If
21:43
we're funding 100% of the purchase price, including the GSD, which we
21:46
do, then if you don't have something else
21:50
at risk in the deal, then we're carrying all of the risk. And it's pretty
21:53
easy just to walk away if things don't work out. We
21:57
do want to see people invested heavily in the success of what
22:00
they're doing and to have something else at risk to
22:03
encourage them to work through those difficult times with us
22:09
Just quickly, if you're tired of explaining your operation to a new bank manager
22:13
every year, only to get a one-size-fits-all deal that
22:16
doesn't fit your business, we can help. At Season Finance, we
22:19
do things differently. We've got over 70 years of combined experience
22:23
in agricultural lending, and we work for you, not the banks. We're
22:26
the consistent expert team in your corner, fighting to get the finance
22:30
that actually helps you grow, purchase the next property, and
22:33
build your legacy. Don't leave money on the table. If you're looking at your next
22:36
move or just want a second opinion on your current setup, Click the link in
22:39
the show notes to book a confidential, no obligation chat with the
22:42
team and we'll show you what's possible. Righto guys, now back to the
22:46
episode. Let's talk about the cost of livestock funding. Like
22:49
it's not your traditional bank interest rates and
22:52
you know, often the talk in the market that it's a lot more
22:56
expensive and you know, you know, that
22:59
the livestock funders are taking a lot of the profit out of
23:02
the deals and that sort of thing. But, you know, the way I see
23:05
it is that they're sort of enabling the producer to make a
23:09
bigger profit. Like when you compare adjustment, say, to
23:12
funding a mob of trade cattle on a livestock finance,
23:16
I think if you actually sat down and do the numbers, nine times out of 10, you're
23:20
better off if the market goes with you. And like, obviously there's a lot more, there's more risk,
23:23
but But let's talk about the rate and how you see that and
23:31
Yeah. So look, I think the starting point for answering your
23:34
question, if you like, around costs is we
23:38
don't take mortgages. We don't have the luxury of a bank. We're not
23:43
secured by a mortgage. And so
23:46
we don't have the protections that a bank has. And consequently, our
23:50
cost of funds is materially higher than a bank. And
23:54
look, to be quite honest, the vast majority of our clients are borrowing money
23:58
from their bank at a lower rate than we can borrow it at. Because they've
24:01
got a mortgage to offer, and we don't. But the reality is
24:05
that whilst Our headline interest rate is
24:08
higher because we are offering
24:12
to fund 100% of the purchase price of the animal. The repayment
24:16
terms are flexible, so we're not asking for any principal repayments until the
24:19
stock is sold in the case of trading stock. And in
24:23
the case of breeding stock, we're actually aligning the principal repayments with
24:26
major sales programs in the client's schedule, there's a
24:29
lot of flexibility and variability that actually minimizes the
24:33
cash flow impact. And so there's a real dollar value in
24:36
that. But what we also find in a stable market, so where
24:39
the market is that you're selling in and buying in is reasonably
24:43
similar, On average, our clients
24:46
are earning $6 for every $1 of interest they
24:50
pay us. If you focus on
24:53
the headline interest rate, you can talk yourself out of an opportunity that
24:57
really exists for your business. But if you focus on what's
25:00
in it for me after I've paid legacy, for example, then
25:05
it becomes quite compelling if you're confident in your ability to deliver. So,
25:09
I think that's the context that we think people should think
25:12
about is what incremental income can I earn in my
25:15
business that I otherwise couldn't earn if I wasn't using a livestock financier.
25:20
Yeah, and that's the thing. It's pure profit, really, isn't it? It's
25:23
the way that you position it. And like I say, if you compare it
25:27
to, say, receiving $5 or $10 a week adjustment in
25:31
comparison to making the $5 profit that you're saying,
25:36
it's adjustments It's dear
25:40
when you're paying and it's cheap when you're receiving it. I think
25:43
that if you actually sit down with a piece of paper and work it
25:47
out, and have you guys done many analysis
25:50
around that with comparing adjustment to what you guys do on
25:55
Look, if I own country, In
25:58
a stable market, and I finance cattle with
26:02
legacy, rather than take external stock
26:09
That's the maths that we do. So it is very compelling. And
26:14
if you want to have control, if you want to own the stock, you're
26:17
prepared to accept some market risk. But if the pasture's
26:21
in front of you, you know what it'll do. If it's going
26:24
to be doing 0.6 point, if your cattle are going to be doing 0.6 point, 7, maybe
26:28
0.8 a day, then you are going to outrun that interest rate many,
26:33
Yeah. There's not enough awareness around the livestock pace
26:36
at times, around the opportunity that it can to help you grow your business. I
26:39
think there's at times people don't consider it
26:43
as a viable option because they get scared of the interest rate up front, but they don't actually
26:46
sit down. and work it
26:49
out in terms of how much money they potentially could make if they
26:52
actually looked to use a funder like
26:57
And look, on an annualised basis, a typical crossbred steer
27:00
in Queensland is growing at about 60% per annum in
27:05
And that's doing about 0.7 a day. And
27:09
your typical crossbred lamb in the south is actually
27:12
growing at about 120% per annum in value. Now,
27:16
obviously, you're probably not going to hold it for 12 months. But if you annualize it, that's
27:19
what it looks like. Now, if you're paying away 10%, 12% to us, and you're earning 60%, the maths
27:30
And talk about the lambs. So you guys, there's no issues around
27:34
the sheep, like you guys fund a lot of sheep as well. Is there anything
27:37
that you guys, like, do you do goats and that sort of stuff, or
27:42
Yeah, so at the moment, we haven't funded any goats. We actually have the ability to
27:45
fund goats, and it's in our credit policy. But we haven't
27:49
funded any at this point in time. We
27:53
will fund virtually any stock class of cattle, and
27:57
similarly for sheep. So, we do both breeding stock and trading
28:01
stock. The vast majority of our book is trading or
28:05
backgrounding stock. We've got funding quite a few lambs
28:08
in the south that are being grain fed because it's been very dry down there up
28:11
until recently. And there's been, grain's been cheap, lamb's been high.
28:15
There's been a real dollar in that and people have kept generating income with minimal pasture
28:19
on the back of those sorts of trades. So, that's been good. We're doing dairy as well.
28:22
So if you've got clients and our focus in
28:25
dairy is really around existing established operators wanting
28:29
to buy another 100 cows or 200 cows or grow an
28:36
And where do you see the future of ag lending? Like where
28:40
do you see, you know, the livestock funding piece has probably been on
28:43
the scenes in Australia for the last 10 years. So in the degree
28:46
that it is now. Where do you see the future of
28:49
this sort of funding going and the future of legacy livestock?
28:53
Yeah. Look, I think livestock finance is becoming very mainstream now.
28:57
And I think when I look at our portfolio of clients, the
29:01
vast majority of them are very well-established producers who've
29:05
got really good quality asset bases and enjoy
29:09
the support of their bank. but can't quite get enough money to
29:13
optimize the return from the asset base they've already got. And so that's where
29:16
we come in. It's complementary or supplementary capital
29:21
that enables them to really turbocharge their returns from
29:24
their existing asset base and maximize the returns from
29:28
their assets, which in turn positions them to go and expand and
29:31
buy the next block. go again. And
29:35
so we tend to be funding those progressive producers. So I think we're
29:39
here to stay. I think we're
29:42
a little misunderstood in the market by the banks, but I think we've
29:45
got a very important role to play now. And if you look at how
29:50
long specialist livestock financers have been now in
29:53
place in Australia. There's just this legitimate role
29:57
to play supporting good quality
30:00
producers. I think in the early days, there was a bit of a stigma around, oh,
30:05
you've got to be in trouble to be talking to a livestock funder. Well, when I
30:08
look at our clients, they are very
30:12
good quality operators with good quality assets that are really looking
30:15
to optimize returns. And they've come to realize that they
30:19
can pay a higher rate to us and still materially improve
30:24
Yeah. It's all about profitability, really, isn't it? Absolutely. And
30:27
that's the thing. I think the guys that really understand
30:31
their business and their profitability see you guys as
30:34
a tool to help them grow. And that's probably the point, isn't it?
30:37
Absolutely. Is you're an enabler to growing businesses. Yeah.
30:42
Where I see the livestock funding really helps
30:46
those businesses that are on a growth trajectory buying that next property or
30:50
taking on a lease block, it really helps them turbocharge that and get
31:00
You guys are a lot more probably responsive, flexible. Talk
31:04
to me around the turnaround times. If I needed to buy a
31:08
mob of cows off Auctions Plus on Friday, how
31:14
Yeah. Look, we will generally turn any
31:17
size application around in 48 hours. Because
31:22
we're industry specialists, we understand the industry. All
31:26
of our team members are familiar with the industry. We
31:31
are very clear about backing the judgment of
31:34
our clients. So if they're of good character, good assets,
31:38
sound equity, then we're going to be making a decision very, very
31:41
quickly. usually 48 hours to get to a decision. And
31:46
then 24 hours after that, or sometimes less, they've
31:49
got documents in front of them. And the day after that, they're trading. So we can turn
31:52
it around in three days and actually have invoices settled in three days if
31:56
we need to. Typically, people are getting
32:00
an answer in two days. The documents are turned around a couple of days after that. But
32:04
sometimes, we get a call from someone, and I can hear the auctioneer in the background.
32:09
We know there's going to be a sense of urgency. But look, we
32:14
do charge a higher interest rate and we're very focused on providing a premium service.
32:18
And so we think that's part of what you get
32:21
when you deal with a livestock funder like Legacy, is you get that premium service,
32:25
fast turnaround, a good understanding of what you're doing, and
32:28
the ability to make those decisions quickly. So it's not just the
32:32
initial trade, but it's very common for
32:35
us to have a client that initially borrows $500,000, then they
32:39
figure out how much money they can earn from putting our capital to
32:42
use, and how the structuring in terms of not
32:46
having to make principal repayments, very flexible repayment terms
32:50
that are aligned with when they receive cash. Once they
32:53
figure out how they can use the capital to their best effect, often they're
32:56
coming back and saying, hey, we'd like to increase our limit. Or
33:00
another thing that happens is someone will be, they'll have a
33:03
$500,000 limit, they're drawn to $300,000, and a really good
33:06
opportunity pops up for $300,000. So it's going to take
33:09
them $100,000 over their limit. For us, that's a phone call.
33:13
This call, we'll turn that around very, very quickly. Often,
33:17
if someone rings me and I'm familiar with the file, I'll
33:22
Yeah, it's sort of old school banking, really. It's like that old school service on what
33:25
you used to get from a bank manager that understood your business. So I think
33:29
it's, you know, and those opportunities, you need to take advantage
33:33
of them there and there. A lot of the time, you don't have time to go back to
33:36
the bank. and say, you know, I need an extra 100,000. At
33:40
times that can take a week or two weeks to get sorted with your
33:43
traditional bank. So you guys have really got a niche
33:47
there, being able to provide that quick service. I know the rate's a bit higher, but
33:50
being able to take it, you know, the profit that can be made from
33:54
taking, making the most of those opportunities, it's
33:59
Yeah, well, look, I think the profits you can generate make the rates look cheap
34:03
That's right. Yeah. So
34:08
what's a mistake you see people make with their finances across the
34:11
board? Like you get to talk to a lot of producers, a lot of good producers. What
34:16
do you think is a common mistake across ag
34:24
Well, firstly, I'll give your business a plug, because I think the biggest thing that
34:27
we see is people, they've
34:31
got some bank funding. They've had five managers
34:34
in the last four years. They don't really have a relationship with
34:37
their banker, and they don't know how long their current bank is going to be around. And
34:41
they're frustrated. So as long as they
34:45
don't want any more money, and they keep meeting their payments on their current loans, there's
34:48
no issue. But if they've got a dynamic growing business and they're
34:52
wanting limit increases or more money to do something else, they're
34:57
frustrated. And in my
35:01
time, in my early days, in the ag banking industry, it
35:04
was very relationship driven. And it feels
35:08
very much less relationship driven now at the bank level,
35:11
which is why I think businesses like yours have been so successful. Because
35:15
people can deal with you. day in, day out, year in,
35:18
year out, you get familiar with their business. They know they can rely on you. They
35:22
don't have to re-explain everything every time
35:25
there's a change because you've got a very stable team. So
35:28
I think that's one of the big changes we've seen in the industry is this
35:32
movement towards brokers. And brokers and very
35:36
good broking businesses are focused on providing
35:44
Yeah, and that's the business that we created is effectively
35:48
what a bank manager was 15 years ago. We filled that
35:51
void where the banks have probably struggled in
35:56
the last 10 years. Their investment into people probably hasn't been there like it
35:59
was in the past. And the other thing is that we
36:02
give people the options also. We have access to legacy. We
36:06
have access to all the major banks. It
36:09
just gives people, especially in regional and remote areas,
36:13
access and distribution of these products that they
36:16
mightn't usually be able to get access to in their local towns, which it's
36:20
great having funders like Legacy that are on
36:25
board with brokers and helping us to grow our business and helping the
36:32
We're very much focused on a long-term relationship. So I
36:37
think there are some specialist livestock funders that are much more transactional
36:40
in nature than us. But we provide a revolving limit
36:44
that clients can transact over and over and over again within that
36:48
limit. And what we want to do is develop an understanding of
36:52
their aspirations, their goals, their business, how it
36:55
works, how the cash flows through it, so that we can align you
37:00
know, the funding to help them get the best effect from their business.
37:03
And to do that, you've got to develop a relationship and
37:06
you've got to invest in that, you know, in understanding the client's business
37:10
and building an understanding of what they're trying to achieve so
37:16
Yeah, and one thing I have found dealing with Legacy and the other livestock
37:19
funders is that Legacy does have probably a lot better relationship with the customer and
37:23
understanding probably than some of the others in the market, which I think
37:27
is really important, especially when you're dealing in an asset that
37:31
can be here today, gone tomorrow, you know, in terms of there's a lot of trust there
37:34
when you're financing a live animal. I think it's really good that
37:38
you guys understand the customer and who you're dealing with,
37:41
which is crucial to the to the
37:44
relationship and the success of the customer, really. What are some of the things that
37:48
producers should fix in their own businesses, do you think, before
37:52
they go and apply for more finance? Is there anything that
37:57
Well, it's interesting. Our focus is on backing businesses
38:01
that are successful and growing in their own right, but
38:05
are being constrained from a lack of capital. I think sometimes
38:09
it involves a change of mindset from a producer. It's like, OK,
38:13
are we going to keep operating in this constrained capital environment,
38:17
which is minimizing the amount of profit or holding back
38:20
the amount of profit we can generate from our existing asset base? And
38:24
am I prepared to pay a higher rate for
38:28
some supplementary capital that will actually generate
38:31
far higher returns? Because what we say is that most
38:35
producers are covering their costs. They're meeting their interests.
38:39
And in some years, they're shooting the lights out. In other years, they're making
38:42
a material loss. And in three or four years, they're
38:46
just breaking even. But when you
38:50
get that good season like we're seeing in the Longreach district at the moment, for example,
38:55
and there's a real opportunity to carry extra stock, People
38:59
are often saying, well, I haven't got enough headroom in the overgraph, so
39:02
I can't do it. And so they might take some adjustment on
39:05
if they can get it. But the more progressive producers who
39:09
have really spent time with the likes of yourself, understanding
39:13
where the opportunities lie, understanding what
39:18
some incremental capital could do for them in terms of profitability, I
39:22
think that's what they've got to do is really challenge the mindset around
39:26
OK, it's more expensive than bank funding, but what
39:29
does that get me? And I think we
39:33
talk about progressive producers a lot because they've broken through that mindset and
39:36
they've unleashed a new level of profitability in their business that they
39:42
Yeah, definitely. And so tell me for, to
39:45
get a yes out of Legacy Livestock to, you know, I
39:48
want to buy a mob of cattle. What do I need to do to show to you? Tell
39:52
me just what, what does Legacy look for to get it, to prove
39:58
Yeah. Yeah. So, you know, we're a bit like you focusing on, you know, the
40:01
big C's, uh, you know, so character, capacity, you
40:05
know, collateral and cashflow. So they're the things that we really focus on.
40:09
So, and the single most important one is character. We like to fund people
40:13
that are well established in a district, been there for some time. Um, their
40:17
name is important to them in their local community. So we know we can rely on
40:20
them. to really dig in if things don't work out, and we can
40:23
work with them proactively. And they'll communicate well with us. So
40:28
that's number one. Number two, they need to be
40:31
able to present their statement of assets and liabilities. So this is where a broker, I
40:34
think, becomes very important, is presenting good quality financial
40:38
information succinctly to us, which
40:42
enables us to go through our credit process very, very quickly, get
40:46
that turnaround in 48 hours. So it's really like, am I of
40:49
good character? Does your credit score sound? Can I present basic
40:53
financial information in a succinct way? And
40:56
can I demonstrate a plan? So what is my intent? What am I
40:59
going to do with the money? People need to be
41:02
able to show us what their intent is and what trade
41:07
they want to engage in and what the plan is so that we can
41:13
Yeah, we talk a lot in previous episodes on Dollars
41:17
in the Dirt. I've talked a lot about understanding, having a clear plan on
41:20
where you want to go is really important. It's
41:24
hard to sell a ship if you don't know which port you're heading to. I
41:27
think it's the same with you guys. If the customer doesn't know where they want
41:31
to grow their business, how they want to grow, it's really hard to provide that capital to help them do
41:34
that if they don't really know where they're heading. How do they know? If
41:37
someone's out there listening to this and thinking, maybe I should
41:41
look at putting a limit in place, what do you think they should do and
41:45
what should they have ready to come to me or come to
41:50
Yeah, so look, I think it comes back to
41:54
the point we discussed earlier, where what is your plan? So be
41:57
really clear about what you want to achieve and what you're going to need financially
42:01
to achieve that plan. And then really, it's a matter of coming
42:04
forward, using someone like yourself to actually put the plan together.
42:09
articulate what you're trying to achieve, support that with relevant financial information,
42:13
statement of assets and liabilities, last couple of years financial statements. And
42:18
we are very much a forward-looking organization. So the historical
42:22
financial statements for us are less important than for,
42:25
say, a bank. They're very useful in
42:29
validating what we see around the demographics
42:32
of the business. So what's the annual turnover and what's the
42:36
expense base and those sorts of things. So it's a good reference point
42:39
for us, but our focus really is on the plan. What is
42:42
the client trying to achieve? What is their strategy? Is that well articulated
42:46
and well thought through? And are they clear about how
42:50
much working capital they'll need to make that happen? So
42:53
I think if they can talk to someone who can articulate that
42:57
to us, get it down on paper and present it in a format that works for us, like
43:02
your team in Longreach and further
43:06
through at Queensland, then I think that's very helpful and it helps
43:09
us to get to that decision much quicker as well. But essentially, if
43:13
you're an existing established producer, you've been in business more than three
43:16
years, got an ABN and registered for GST, you've
43:20
got sound equity in your property, You're
43:23
supported by your bank, but not getting all of the money you want from them, then you're
43:27
probably a good fit for us. I think the good point to make is
43:30
that if you're looking to get money from
43:33
a livestock financier, basically compile
43:39
So yeah, it's similar. So the information required for an annual review
43:43
is similar to what a livestock funder would look for to
43:47
get a limit approved. It's very much the same. And from our perspective,
43:51
a lot of our clients, we have all the information together. And if you're
43:54
working with a broker, they should be able to have most
43:57
of the information at hand to put a limit in place. So yeah,
44:01
there's nothing additional or extra that a livestock funder needs
44:04
that a bank wouldn't need for a review. So probably to recap
44:08
on today's conversation, one thing is just making sure you've got that documentation really
44:12
in order, you know, your statement of position, all your
44:15
documents together to present a really clear plan, not
44:19
only for your bank, but also for a livestock funder. It's really important that we have that
44:23
information up to date and accurate and
44:26
are in a well-presented proposal to present your business in
44:30
the most professional manner possible. Absolutely. Well, thank you, Richard. Thank you for
44:33
your time this morning. It's been great catching up. Learned a lot about livestock
44:36
funding, and you guys play a very big part in the
44:40
market in terms of helping producers grow. And I see
44:43
the massive opportunity there for you guys to help grow
44:46
the industry and keep the wheels turning. So thank
44:52
No, thanks, Brec, and really appreciate it. And look, we love working with the team at Seasoned.
44:55
You do a great job, and we always see happy clients coming through