Latest / Dollars In The Dirt / #027 - The $2.9B Farming Revolution (Virtual Fencing!?)

Transcript

#027 - The $2.9B Farming Revolution (Virtual Fencing!?) · Dollars In The Dirt

• 0:00
  Virtual fencing isn't just a cool gadget anymore, it's a multi-billion dollar
• 0:03
  shift in how we manage livestock. Most producers think that because
• 0:07
  the technology is proven in the paddock, the bank will automatically fund
• 0:11
  it. And the truth is, banks don't lend against innovation, they
• 0:14
  lend against proven cash flow. After helping hundreds of farmers secure
• 0:17
  over a billion dollars in finance, I can tell you that the best operators don't
• 0:21
  just ask the bank for money to buy collars. They present a bulletproof business
• 0:25
  case that proves the return on investment. So in this video, I'm
• 0:28
  gonna show you exactly how to structure a finance proposal for a
• 0:32
  major ag tech investment like virtual fencing. So the bank
• 0:35
  says yes without crippling your working capital. The first thing you
• 0:38
  need to understand is how the bank views agricultural technology. When
• 0:42
  a company like Halter hits a $2.9 billion valuation, it
• 0:46
  proves the technology's no longer an experimental idea. It's
• 0:50
  a serious part of a modern cattle production. But banks
• 0:53
  are inherently conservative. When they assess your serviceability for
• 0:57
  a new loan, they're looking at historical data. They usually
• 1:01
  assess your ability to repay based on the conservative assumptions about
• 1:05
  your current production levels. And the problem is
• 1:08
  they may not fully credit the upside of the technology. They
• 1:11
  might not factor in the massive labour savings, the better
• 1:15
  pasture utilisation or the improved herb management
• 1:19
  that virtual fencing provides. If the return on investment is
• 1:22
  real but not well documented, the loan approval won't
• 1:25
  reflect the true strength of the investment. The
• 1:28
  bank might treat a $500,000 ag tech rollout as just
• 1:31
  another capital expense that drains your cash flow, rather than
• 1:35
  a business improvement that generates a measurable payback. This
• 1:40
  disconnect happens because a credit assessor in Sydney or Melbourne aren't
• 1:43
  out there mustering the cattle. They don't intuitively understand
• 1:47
  that virtual fencing allows your cattle to graze in riparian zones that
• 1:51
  were previously inaccessible, or that it eliminates the
• 1:54
  need to replace a 20km physical fence. And if you
• 1:57
  don't explicitly connect the technology to a hard financial
• 2:01
  outcome, like increased carrying capacity or reduced labour
• 2:04
  costs, they'll only see the risk, not the reward. Before we get into
• 2:08
  how to structure this for a bank, if you're looking at financing a major property
• 2:11
  upgrade or an ag tech rollout and you want to know what loan
• 2:15
  options are available to you, that's exactly what I'm
• 2:18
  here to help with. Book a free call and we'll work out whether the finance
• 2:21
  stacks up for your operation. No cost, no obligation, and
• 2:25
  the link's in the description. So how do you structure the proposal? This
• 2:28
  is why The bigger question for producers isn't
• 2:32
  whether the technology works, but how you position it with the
• 2:35
  lenders. You've got to translate the investment in
• 2:39
  innovation into a proposal that the credit department can understand.
• 2:42
  A major rollout may be treated differently depending
• 2:46
  on whether it's seen as capital equipment, operating technology, or
• 2:49
  a business improvement. And if you just ask for a half million dollar
• 2:53
  overdraft extension to buy collars, the bank will likely say
• 2:56
  no. You need to show them the mass. need to present a
• 2:59
  clear business case that outlines the exact financial benefits,
• 3:03
  how many hours of labour this will save per week, how much
• 3:06
  it will increase your pasture utilisation and how does that
• 3:10
  translate into additional kilograms of beef produced per hectare.
• 3:14
  And when you can quantify that upside and show the technology pays
• 3:18
  for itself within a specific time frame, you
• 3:21
  change the conversation from can I borrow the money to here is
• 3:24
  how the investment increases the profitability and security of
• 3:27
  my operation. And furthermore, you need to consider the
• 3:31
  lifespan of the technology versus the term of the loan. You
• 3:34
  shouldn't be financing a technology with a five-year lifespan
• 3:38
  over a 20-year property loan. That's a mismatch of asset
• 3:41
  and liabilities, and you need a specific equipment finance facility
• 3:45
  or a structured term loan that aligns with the depreciation and
• 3:48
  useful life of the hardware. This shows the bank
• 3:52
  that you understand capital management, which significantly increases their
• 3:55
  confidence in your deal. And so the broker's advantage. This
• 3:59
  is why having a broker who understands agricultural becomes
• 4:03
  critical. A good broker just doesn't pass your application to
• 4:06
  the bank. They translate your operational strategy into a
• 4:09
  language of credit. They know which lenders have an appetite for
• 4:12
  ag tech and which ones are still stuck in the dark ages. They
• 4:16
  know how to present the projected cash flow improvements so that the credit assessor
• 4:20
  can actually use them to justify the loan approval. If
• 4:25
  you're planning a major investment in virtual financing, water telemetry,
• 4:29
  or any other transformation technology, you need an advocate who
• 4:33
  can fight for the upside. You need someone who can sit down with the bank
• 4:36
  and say, yes, this is a $500,000 expense, but
• 4:39
  it's replacing a $100,000 annual labor cost, increasing
• 4:43
  carrying capacity by 15%. And here are the numbers to prove it.
• 4:46
  That's how you get a complex deal approved on favorable terms. It's
• 4:51
  also about protecting your core working capital. A broker will
• 4:54
  ensure that the ag tech finance is structured in a way that doesn't
• 4:57
  cannibalise your overdraft or limit your ability to buy trading
• 5:01
  stock when the market drops. The goal isn't just to get
• 5:04
  the technology funded. The goal is to get it funded in a way that makes your
• 5:07
  entire business stronger and more resilient. So
• 5:12
  remember guys, innovation in agriculture is moving faster than the
• 5:15
  bank's credit policies. And if you want to deploy transformative technology
• 5:19
  on your farm, you have to build a business case that forces the bank to
• 5:23
  see the value. Don't let conservative lending policies
• 5:27
  hold you back in your production potential. If you're looking at
• 5:30
  a major ag tech investment and you need help structuring the finance to
• 5:33
  get it approved, reach out to Season Finance. And as your broker, this
• 5:37
  is exactly what I do for my clients. and I look forward to