26 Sep How Big is Your Dam?
It goes without saying that NSW is in the grip of a drought.
The new Banking Order around lending
The normal rules of banking and finance no longer apply. Lenders are now super cautious around taking on new clients for two reasons:
- Bank resources are at capacity in terms of managing their existing loan portfolios.
- Banks want to know what your ‘drought strategy’ is, regardless of past, present, or future income; or even your equity and security.
If you need or want to refinance; or have a property purchase opportunity, or family succession plan to be financed, then you must add an extra layer of information on how you will deal with and recover from the present drought.
The Questions Banks are now Asking
Just this week, I have been asked by banks to provide the following information for a deal that was strong on all fronts:
- What type of water is on hand (eg dams; bores), and how long will it last.
- What feed is on hand; how long will it last; what is the intention regarding future feed purchases.
- How is the client going to manage livestock numbers now, and when the season turns for better or worse.
While RSP has always commented on the various risks associated with a deal, this deeper understanding required by the banks takes us all to a new level of commentary.
Call us at RSP if you would like more insights into the world of banking as it stands today.