Latest / Dollars In The Dirt / #054 - If You’re a Grazier Applying For A Property Loan, Watch This

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#054 - If You’re a Grazier Applying For A Property Loan, Watch This · Dollars In The Dirt

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  Before we start looking at another place, you need to know if the bank can actually fund
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  it. Most producers think the approval is about finding a bank that
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  will say yes to the number. After helping hundreds of farmers secure over
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  a billion dollars in finance, I can tell you that the strongest applications get
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  clear on four things before they even apply. So in this video, I'm
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  going to show you how to get sorted before you apply, how to frame the
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  purchase so it makes sense to a lender and when to kick off the finance conversation.
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  First thing I'd look at is the basics, equity, security, cash
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  flow, and serviceability. And that's where the application really starts.
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  Equity is what you've got in the deal. Security is what the
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  loan's tied against. And the cash flow is the money moving through
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  the business. serviceability is whether the cash can
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  cover the debt and you don't need to make it complicated you
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  need to make it clear what equity have you got available and
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  what property can be used as security how much debt are you asking
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  for and how does the business repay it that's the starting point
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  for a property loan but the thing is the reason isn't
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  enough The numbers still have to work, and
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  a lender needs to see how the purchase fits. They
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  need to see the debt, they need to see how the debt can be serviced, and
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  they need to understand the security position. Say you're buying a place next
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  door. That might make a lot of sense on the ground, but it will still need
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  to show the numbers. And what that means is pretty straightforward. Here's
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  the current business, here's the new purchase, here's the equity
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  and security, and here's the cash flow with the new debt. And
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  here's how the repayments are covered. That's a much stronger position. You're
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  not just asking for a yes, you're showing why the deal makes sense
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  and you're making it easier for the lender to follow. Because
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  the person assessing the deal may not know your country. They
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  may not know your yards and they may not know your season. So
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  the application needs to explain it clearly. It needs to join
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  the property and the business. and it needs to show how the extra country
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  will work. And it needs to show the debt and how it's going to
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  get paid. That's the work before the application goes in,
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  not after the lender starts asking the questions. By the way,
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  if you're looking at buying a property or growing the business and want to talk through what
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  the finance could look like, book a free call. The link's in the description. The
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  next thing is the story behind the purchase. Not a sales story, not
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  a glossy document, just a clear explanation on how the property
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  will work. A lender needs to understand the plan. How
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  does the place fit your current operation? What are you going to run there?
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  Who's going to manage it? And why does the purchase make sense? If
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  it's adjoining country, that's easy to explain. Say you're buying
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  a block next door. You can explain how the places work
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  together. That's a clear story. And the lender can see the
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  connection. They can see why the purchase is fit, and
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  they can understand the operational benefits. But
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  if the property is in another region, that's different. That doesn't
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  mean it can't work. It just needs more explanation. Distance
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  raises practical questions. Who's checking the waters? Who's
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  checking the fences? Who's handling the stock work? And who
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  is there if something goes wrong? And who's making the decisions day
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  to day? You need to answer those questions early. Instead,
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  you want a clear management plan. Who is responsible for the property? And
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  how often are they going to be there? And what roles does your
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  current team play? How does the home place keep running?
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  And how does the new place operate properly? That's especially important
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  with a distance purchase. So right, in plain English, where
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  is the property? What is the enterprise? And how does it fit your
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  current business? Who's managing it? And what happens after
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  settlement? It doesn't need to be fancy, it just needs to be practical,
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  so make the ground story match the numbers. That's where the
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  application becomes much stronger. The next thing is cost,
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  and this is where people can get caught. They focus on the deposit,
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  but the deposit isn't the full cost. There's the purchase price,
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  and you've also got all the costs around the purchase. There's stamp duty, which
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  can be a significant number. Stamp duty can be around 5 or 6% of
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  the purchase price, and this depends on the deal and the situation. But
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  the point's simple. It all needs to be budgeted. Stamp duty
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  is a sunk cost. You pay it, and it's gone. It doesn't buy
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  you more cattle, it doesn't improve the carrying capacity, and it doesn't create any
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  income for itself. So you need to allow for it properly. And
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  if you don't allow for those costs, the numbers can get tight. And that's why
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  I like to map it all out early. What cash is needed for settlement, what
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  costs it outside the purchase price, what equity is available and
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  what headroom is left after the deal is done. And the last question
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  really matters because you still have a grazing business to run and
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  current operations still need cash. The new property still
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  needs to be managed and the business can't be stretched from
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  day one. A lender also wants to see that. They
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  want to know the borrower has thought it through and they want to see the full cash
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  position, not just the deposit and not just the headline loan
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  amount. So before you apply, slow down the cost,
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  work through the full purchase costs, including stamp duty, legals,
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  and include those costs if they're needed for settlement. Then look at
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  what the business looks like afterwards and that gives you a clean application
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  and it gives you fewer surprises. A property loan has to service. But
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  it's the point that often decides the application. But the cash
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  flow still has to repay the debt. So the forecast matters. The
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  lender needs to understand the business going forward. What
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  does the business earn? What does the business need to spend? And
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  what debt is already in place? And what happens when the new repayments
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  are included? That serviceability is the key question. And
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  can the business carry the debt? And can it carry it in a realistic way?
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  Say you're buying a more country to gain scale, that can make total sense.
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  But we still need to show timing. When does the new property contribute? And
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  what income is expected? What costs come with it? And how does that
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  line up with your payments? That's the part lenders care about.
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  They just don't look at the end goal. They're looking at the cash flow in
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  between because debt gets paid along the way, not only when the
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  long-term plan is finished. If the forecast only
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  works in a perfect year, it's weak. That doesn't mean the purchase is
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  wrong. It means the application needs more work. You need to
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  understand where the pressure could show up. Maybe income limbs later
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  than expected. Maybe costs are higher than expected. And maybe
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  the season affects the timing. The point isn't to predict everything
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  perfectly. You can't do that in agriculture. The point is
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  to show you've thought it through. And that makes the conversation way
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  more credible. And that's why the cash flow work comes early.
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  It's not just for the lender, it's for the decision. A strong application
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  shows serviceability clearly. It connects the purchase to the forecast,
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  it shows the debt being covered and it gives the lender a sensible picture. That's
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  what makes approval easier to assess. The biggest mistake is
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  starting too late. People find a property first, then they try to work
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  out how to finance it and that puts everyone under severe pressure and
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  the vendor is waiting for an answer. A clean transaction can
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  take 4-6 weeks and that depends on the borrower and the deal. But
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  that's when the information is ready, the plan is clear, the
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  lender can assess it properly and if the information is missing it
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  can take longer. So the first thing I'd look at is borrowing capacity.
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  Before you hunt seriously, understand what you can afford. And
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  that doesn't mean guessing, it means looking at the real numbers, equity,
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  security, cash flow, serviceability, and
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  the full cost of the purchase. And that gives you a better buying position.
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  You know what sort of property fits, you know what size deal is
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  realistic, and you know where the limits are. Starting
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  early gives you options. It lets you prepare the lender pack.
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  It lets you explain the purchase properly and lets you deal with the questions before
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  they become urgent. And it helps you move faster when the right place appears.
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  If the property is nearby, Prepare that story early.
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  If you're in another region, prepare even more detail. Have those
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  answers ready. The same goes for the costs. Don't wait until
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  the contract is signed. Know the stamp duty position. Know what
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  the legal costs are going to be. And know what cash is needed for settlement. And
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  know what headroom is left afterwards. And that's what finance ready really
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  means. It means knowing every answer in final detail.
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  It doesn't mean every answer in final, but the core position is understood. You
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  know your capacity, you know your limits, and you know what sensible deal
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  looks like. That gives you a much better base. Get those
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  things sorted before you need them. So if you're applying for a property loan, start
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  with the basics, equity, security, cash flow, serviceability.
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  Then explain how the property will fit your business. If it's in
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  another region, show the management plan. Budget the full cost
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  of the purchase, including stamp duty legal costs. Then prove the
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  business can service the debt. And then do that before you start hunting
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  seriously. A clean deal can take four to six weeks, but
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  only when the information's clear. If you want help working through
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  the numbers, the structure, and how to present the purchase to the lenders,