Family farms and succession planning

Start a succession plan early

Succession planning comes up when mum and dad are looking to the future of the farm and want to leave their legacy to the next generation of farmers. It may start when the children are in their teens or be left until they are in their 50’s. The earlier the better, but flexibility is important for the plan to succeed.

The end goal of the succession plan

A one size fits all approach does not generally suit and handing over debt to the next generation increases the risk of the farm eventually being lost to the bank. Main factors to consider are the goals of the parents and children. That sets the pattern, but within those boundaries will be many complex issues, including relationships, finances, taxes, mortgages, competition amongst children and differing views of mum and dad.

Family conferences help

First step is discussions with each family member. This includes a sound understanding of the farm, its operations and finances and patient family conferences where people are encouraged to put their thoughts on the table. This should not be done as a final statement, but to open discussions. We really try at GBAC to get this right. Because, if handled badly it could make some family members feel badly done by.

Avoid surprises that could cause consternation

Succession planning needs gentle diplomacy. Often some family members have expectations that others don’t share. In the end we want to make everyone happy. That is why if Succession planning starts in their teens or twenties, everyone has a clear understanding of what is happening and most wishes can be accommodated over time.

Our role

What has helped us with succession planning for clients is experience. From my teens I was raised on Dale Carnegie’s book “How to win friends and influence people”. It gave me a different perspective on working with client families. What I learned about dealing with finances in my Chartered Accountancy courses. Running my own Merino property out west first was a good lead in to me succeeding my 2^nd cousin by purchasing from him the beef cattle property in the Araluen Valley out of Braidwood, originally settled by my great grandfather.

Farm or business debt needs caution in uncertain seasons

ABARE executive director Jared Greenville completed a recent article for farmers on volatile seasons with these words:

“Rather than growing the size of the enterprise or productivity by much, they’re setting the business up to manage the downside risks by simply not being as eager to borrow.”

These are wise words because the future looks quite risky when it comes to refinancing. But it is not only farmers who need to think carefully. Family businesses are under threat from climate change, the economy and big business. It pays to reduce risk in times like this to avoid a major disaster if things go wrong. Recession is looming in many places. The best way to minimise risk is to look for ways to relieve cost pressures. Debt relief would be one of the first. A perfectly happy loan can morph into a dangerous debt in just one or two years. That can also happen when banks appoint receivers to manage the business or farm.

Banks have been very lenient to borrowers since Covid. There are signs that they are starting to lose patience with loan defaults and look to recovery action like receivership. The current boom in prices of real estate has been partly caused by a decade-long boom. Banks seeking to recover debt, may seek to sell mortgaged properties before the boom busts. Many small business loans are secured by a mortgage over the business owner’s home

“Borrowing in good times; Refinancing in the bad”.

The annual Profit and Loss statement often shows banks earning more out of the enterprise than the business owner or farmer. A business loan consultant would know that dangerous debt can be reduced by a variety of means. The sale of an unproductive block may be one way. A write-off by a bank that has treated the borrower badly might be another.

Debt refinance can allow a farm or business loan to be cleared much faster or managed more easily. Borrowers coming to GBAC find, that negotiations with the bank can sometimes yield them more profit than they have earned for years in the business or farm. That particularly applies to those who have been tricked by the bank into unaffordable debt.

In running my own equipment and art hire businesses in Sydney I paid very close attention to my loans and creditors. Developing techniques and strategies with Profit in mind was the main goal. That is because profit is the main way of clearing any business debt.

Business or Farm Debt Refinancing

To make sure business owners, including farmers, get the right loan at the right price with the right loan terms we invented the “Farm Loan Seeker” (FLS) service four decades ago. Today it is an electronic means of borrowing without using an expensive bank-paid mortgage broker that just adds big costs to the loan. When a bank pays a broker up to $10,000 in brokerage to deliver customers on a plate, it expects to make a lot of money out of them. My view is to keep the total borrowing costs as low as possible. Business and farm borrowers can do their own loan hunting very successfully online with an FLS. The inexpensive FLS comes with a guide on dealing with the bank to get the best deal. GBAC will provide inexpensive optional support for various parts of the process if needed.

Borrowers should not assume that the people offering them a loan will look to their interest before their own, any more than the person buying from them will. People look after their own interests first. The Farm Loan Seeker we originally invented in 1987 when banks were first de-regulated. As well as helping other business owners get a fair go from the banks, I was running my two hire companies and a sheep property at the same time. A borrower should never trust the lender to do all the work. Lenders can be ruthlessly efficient at looking after their own interest. That often means agreements that put the borrower at a disadvantage.

Refinance Risks

Why refinance can have risks.

Refinance risks can vary, depending on a wide variety of circumstances. That is because a person who is refinancing is sometimes under more pressure than before. If refinance is not arranged within a specified timeframe, the existing bank could threatening receivership, appoint a manager or foreclosure and sale at auction. The borrower is looking for loan relief.

The best way to deal with that problem is to turn the tables on the bank from whom one is refinancing, by researching its behaviour to identify where it broke the law, the code of conduct or fair trading laws and then sitting down and telling it some home truths about what happens when you raise that by Votergram to some 225 Federal Politicians

Assessing refinance risks by comparing loan repayments against farm profit

“Generally, farmers’ confidence in the agriculture sector drives the demand for debt to fund land and capital acquisitions,” a banker said recently. The average farm profit was reported as $29,000. While many small country roads businesses are not so vulnerable to weather and commodity prices, many are with our major cities somewhat dependent on beach weather. Recent floods have devastated many businesses. Often such disasters dramatically reduce the security value of a mortgaged property. That is the ideal time to start gentle negotiations for the bank to write off a good bit of the debt. When the debt is reduced, the chances of refinanced are enhanced. Those who have played their cards right will often find themselves refinancing a much smaller debt. That is converting risk into advantage.

A Borrower’s Budget

It is vital for farmers and business operators to find out exactly how many dollars a year they will pay in loan repayments. Then compare that to their budgets. Make certain that the budget reflects the current reality rather than a fairy tale invented for a bank. Loan repayments and interest have to come out of profit. It is rash to think that the farm loan or the business loan will produce extra net profit. It often does no such thing and even if it does, it usually takes a few years to do so. A borrower’s budget is their best friend. It should regularly compared with the same period in the previous year and the actuals in the present year.

There is usually a big difference between the total income or turnover of the enterprise. Profit is the bit left after expenses. Loan repayments must be made from Profits. Don’t be misled by turnover!

Refinance Options

The problem is that a even a loan refinance can quickly turn into a debt trap. This can happen with a couple of bad years if the economy crumbles or flood waters cut business. My first reaction when confronted with refinance or even original loans has always been to see farm in drought if it is possible to achieve the same result without borrowing from a bank.

Over the years, I have shown farmers a variety of alternatives, from savings, to interest-free loans and trade-offs.

Assets can be acquired without getting the bank involved. Publicised interest rates and charges are not the best that can be achieved when borrowing. Offers of special rates and reduced charges requires negotiation. Those wanting to borrow on best terms and conditions, the “FarmloanSeeker” or “FLS” targets an enquiry to a range of banks. It is an easy way to check out what is available. Then negotiate the very best and cheapest loan possible.

Debt help!!

The need for Debt help

This year CBA will earn 10,000 times as much in real money terms as it did before bank de-regulation. The banks are pulling in massive profits just as their customers are drowning in debt. Why? Because the banks have been marketing their mortgage loans to borrowers with big asset backing and those borrowers are now drowning in unaffordable debt as the bankers knew they would. But in the process the banks have often broken the law and the Code of Banking practice as well as fair trading regulations, all of which the recent Royal Commission identified, but did not compensate borrowers for the damage done.

Traditionally we individual Aussies trusted the banks and put up with the way in which they treated us. That was because there was not much else we could do. To fight a bank in court could cost millions.

GBAC has found that by analysing and researching facts, figures and bank behaviour it often turns out that the borrowers have been deliberately tricked into loans with impossible terms that the borrower did not read. The banks often banked on that, particularly with busy family business owners and farmers who were more skilled in their own enterprise than borrowing and just trusted the banks to do the right thing. Prior to de-regulation the bank would have done the right thing.

Turbocharged Voter-Power for borrowers

Today mortgage borrowers, in their role as voters have great sway over government because GBAC realised that Parliament controls the bureaucracy which delivers government and the voters, control who sits in parliament.

GBAC has developed the Votergram Turbocharge system that allows each and every borrower to tell every single member of any or every Parliament, what the bank has done to them, how unreasonable the bank has been and how disastrous bank de-regulation has been when borrowers are literally robbed and financially abused so that banks can earn billions and their executives can earn multi-million dollar salaries.

Many banks faced with the option to sit down and sensibly discuss how best to deal with the debt in a way that treats the borrower fairly or have the matter discussed by the federal parliament, opt to confer with the borrower and GBAC’s negotiators for an outcome that is fair to the borrowers first. They are after all the customers and the most vulnerable party. If the bank does not act fairly the borrower with GBAC’s assistance can Turbocharge the campaign for a fair go, by Votergram for help

Today there is a completely free association of voters all over Australia. It is called the Australian Voters Network or Voters. It has no party politics and exists only to help and educate its members to persuade the parliaments to improve the fairness factor in Australian government policy. The more who join and share their own experiences, the fairer Australia becomes. It fits with the National Anthem doesn’t it? It is a good organisation for borrowers to join because it can help them a great deal when the crunch comes on.

Banks and Big Businesses Monopolies

For a long time the moneylending banks and big business monopolies have controlled government by bribing our elected MPs with election donations and bullying them with highly paid lobbyists. It looks as though the federal parliament is going to reduce that and such a move will again help borrowers in trouble with their bank.

Anyone wanting to learn a little bit more can contact GBAC which is run by a former Chartered Accountant / CPA who has run family businesses and farms as well, so knows just how hard it can be to clear big bank debts.

Democracy is the best system of government in the world, but only when driven by the voters to fulfil its potential. Government for the people comes from government by the people via their parliament. Borrowers have a great resource in their parliaments and GBAC has developed the tools to help them access it.

Join Voters now and Turbocharge your Voter-Power. Then give GBAC a call and see how they can help you. If bank behaviour has really upset you, you can go to the BankWatch site to record what happened so that it can be taken into account in submissions to government.

Greg Bloomfield

Debt Solutions for a Borrower

“The Winning Borrower”

“I was phoned one day by an IT executive, just after I had spoken to a farmer whose total crop proceeds had been seized by the bank. The IT expert had a similar problem. His bank account had also been frozen after a large deposit had been made into the account. The bank’s receiver took it all.”

So begins “The Winning Borrower”, the story of how one Sydney Chartered Accountant with a farming and family business background became a “bank loan consultant” and took on the big banks to provide Aussie debt solutions for Aussie farmers and business owners.

Baseball bats to battle bank debt issues

In the process of negotiations, mediations and refinancing, he discovered the disturbing details of how banks lied, cheated and trapped farmers in debt they could not clear without selling the farms and did the same to business owners who had mortgaged their homes. The author relates how untrustworthy banks have exploited customers in their quest for multi-billion-dollar profits. He takes a metaphorical baseball bat to the bankers, explaining how some of his clients ended up making more profit out of their loan settlements than out of farming or business.

Royal Commission investigates bank loan problems

The day the Prime Minister announced that there would definitely not be a Royal Commission into the banking industry, the author sent a Votergram to each one of the 225 Federal MPs decrying the decision. Within days the decision was reversed and the Royal Commission announced.

Author makes book free to farmers during March

“The Winning Borrower” 85 page e-book by this businessman,4^th generation farmer, Chartered Accountant and CPA , who became a bank loan consultant by accident, is available during March as a FREE e-book to help business owners and farmers all over Australia enjoy more profitable and secure lives.

Succession plan for farm foreclosure?

Saying “No thank you”

Young farmers will be better off if they decline offers of farm succession based on them borrowing an interest-bearing farm bank loan. Their retiring parents and the farm will be safer too.

The inclusion of potential bank debt problems on top of fire, flood, drought, commodity prices and government policy, can be destructive to any farm family. I changed GBAC from a Chartered Accountancy firm to a farm debt consultant once banks were deregulated. They were promoting “asset lending” – loans that depended on sale of the farm, rather than farm profits, to repay the debt.

Debt enriches banks

Succession planning debt enriches banks, impoverishes young farmers and puts farms at risk. Serious lateral thinking by experts familiar with farming and bank loans will tailor a safer alternative for those who want to keep the farm in the family.

Passing on farm debt is rarely beneficial, so rather than refinancing debt to the youngsters, every endeavour should be made to clear all mortgage debt first, so the younger generation can begin with a clean slate. It is nothing like as hard as is thought.

Personal experience

When selling my Merino breeding farm to buy the beef cattle property that had been settled by my great-grandfather, the asking price was many times higher than what I had expected. That was due to a recent nearby sale at a price an agent called “ridiculous”. I could not have afforded interest as well. So I devised a plan that I could afford. It involved minimal external debt and it worked extremely well for my relative-vendor.

Good succession planning avoids the need to call in a farm debt consultant when the bank has appointed receivers to run the farm. The last thing any young farmer needs is a debt problem that leads to farm debt mediation, the forerunner to potential foreclosure and sale of the farm.

Avoiding mortgage stress

Bank debt is offered by banks because it converts farm revenue to bank revenue. Better to keep the money in the farm’s saving deposits and avoid the mortgage stress.

Greg Bloomfield

New Year’s Resolution – Farm Succession Planning

Do something about passing on the farm before it is too late.

Here are 5 points on farm succession.

Don’t involve an external lender ( eg bank) in your farm succession plan.
There is nothing clever about handing down debt for your children to deal with.
Add fire, flood, drought, price drop or illness and chances are they will lose the farm.
GBAC ( Greg Bloomfield Agribusiness Consultants) can help your farm transfers without external debt and make both generations happy.
GBAC takes the family friction out of succession plans, satisfies all parties.

Call Greg now to chat on 0428 417 496

Trouble with Transmission Towers

Profits and cashflow affected

Farm or business profits can be suddenly and badly affected when government utility construction staff enter a property. A farm debt or a business debt can do the same if cashflow is badly affected. Gates can be left open, fences or walls knocked down, trading stock or livestock lost and access blocked. GBAC consultants have run their own businesses and farms. They also have an expertise in dealing with government that many others lack. GBAC can be called in to make sure that any transmission construction on or over a business or farm is properly managed to have minimal impact on finances, particularly long term loan debt. It can negotiate strongly for serious compensation if damage is done. Enforced transmission lines may have to be accepted, but the wise property owners will ensure that it is at least very profitable.

Don’t waste time with bureaucrats

Individuals often need to make sacrifices for the good of their nation, but when they do they should receive very generous compensation for doing so.

Property owners troubled by transmission lines should not waste time negotiating with bureaucrats or public servants over whom they have no control. Polite persistent political persuasion in the privacy of parliament is the best way to go

Go to those who can say “Yes”, not those who can say “No”

GBAC uses cheap, simple and effective Votergrams to take their concerns directly to every Member of Parliament. MPs are the only segment of government over which most people have any control. In a property owner’s role as a “Voter”, that person gains considerable political power. Voters control political careers. Most MPs are very happy to help voters when approached in the right way.

Chartered Accountant Greg Bloomfield developed Votergrams in his GBAC office before he concentrated on helping Aussies with their mortgage loan and debt issues. To provide strength to those who need community support for more effective political persuasion he also formed the Voters! Network. Transmission towers threaten the peaceful operation of businesses, homes and farms across Australia. That is the sort of issue on which voters need to join forces. When long term mortgages are taken out it is not possible to foresee the future. We have seen millions of dollars damage done by utility construction teams who simply do not know or care that mortgage repayment schedules can be seriously disrupted by intrusive construction teams. GBAC is good at making them care, even long-distance online .

Join Voters! and have other voters support you

GBAC knows that bringing in Voters from all over Australia to report problems to Federal MPs helps to deter harmful practices by construction companies. Votergrams can quickly put voters in touch with every state and federal MP in the country. However as negotiating consultants GBAC knows that it is rarely necessary. Once a construction company knows that, it tends to treat property owners properly.

Farm Debt – consultants

Do farm debt consultants deliver financial benefits to farmers ?

GBAC Farm Debt Consultants’ farm loan clients benefit from Greg Bloomfield’s years as a Chartered Accountant/ CPA with an emphasis on pastoral companies. They gain too from his experience when he headed the largest NSW Farmers branch, ran sheep at Tullamore and cattle at Braidwood.

Many followed his sound farm financial advice in the Hereford Quarterly and rural papers. Farmers were amazed when they won farm debt mediations and huge debt write-offs.

Farmers today are freed from overwhelming debt, with tailored refinance. In the process farmers unexpectedly earned hundreds of thousands, sometimes millions of dollars.

At home on a horse or bike, fixing fences or marking calves, having financed his own farms, Greg soon identifies bank loan problems and bank debt solutions.

Working by phone and fax previously, phone and email now, GBAC provides farm debt solutions in a way that neither RFCs nor local Accountants can, using unique and persuasive strategies to win a fair go for farmers all over Australia. Receiverships and foreclosures are stopped and prevented.

Anyone needing help with a new farm loan or an old farm debt should ring for a chat with Greg any day or evening on 0428 417 496 or 02 9988 3312. Being away from the local town means that what farmers discuss with GBAC remains completely confidential.

Borrow Better with your own “broker”

Good Roads affect small business How can any small to medium sized business or farmer be properly served by a mortgage loan broker who is paid substantial commission by a bank and knows little about business or farming?

Either the broker serves the bank or they serve the borrower. They can’t serve both because what the bank earns, the borrower pays; what protects the bank makes the borrower vulnerable if loan problems arise.
Who do the brokers deal with most, the borrower or the bank? The bank of course on a daily basis.
At Borrow Better we do not accept any commission or payment from the bank. We work for borrowers only. As the bank does not pay a broker on loans we help borrowers negotiate, we work to get borrowers a substantial reduction in the loan cost.
Borrow Better by having banks compete for your loan business, whether it is a new loan, restructure or refinance.
Borrowing is easy. It is the paying it back that is hard. So the most important part of a loan is not the getting of the funds, but the price and promises given to get them.
Price of a loan includes:
Interest rate
Set-up charge
Bank fees
Amount and timing of regular repayments
Contract terms
Conditions under which bank can call in the loan to be repaid in full.
Flexibility if the borrower strikes hard times, gets sick, loses income.
Ability to repay early or faster.
Borrower’s ability to meet repayments out of income as only interest will be tax deductible
How well the borrower gets on with the bankers involved.
The smiling lender can quickly be replaced by ruthless debt collectors in some loan contracts.
Who will gain the most financially from the loan? Make it the borrower!
Sometimes borrowers need loan help. At other times help is needed with a defaulting debt
If farm debt mediation or business debt mediation arise we can give expert assistance.
Even if a bank moves to foreclosure or appointing receivers, we provide appropriate, experienced assistance to borrowers.
GBAC consultants are qualified and experienced at running their own businesses and farms.
How will that be achieved? BorrowBetter.au consultants will tell you.
Call now for a friendly chat 0428 417 498, 0422 907 155, 02 9988 3312

Email greg@gbac.au, pat@gbac.au