Tony Rhodes, East Coast Rural Support Trust.
Feeling the pinch? East Coast Rural Support Trust has the following advice to give to cover a number of areas of concern for farmers.
■ Finance plays an essential role in every business, including farming, growing or agri-business. Related to this are matters such as debt management, tax management and business structures.
Usually you can see a way ahead and you are working with your accountant and bank.
But sometimes you feel financially stuck. You may want to discuss this with someone, and the Rural Support Trust is here to help.
We may also be able to provide some assistance which you can tap into which will enable you to get independent advice.
A fund established by banks and the Government can offer support for farmers struggling with farm debt.
The Government has allocated $200,000 for the Farm Business Advice Support Fund, to be managed by Rural Support Trusts.
For a qualifying farmer, the fund will provide up to $6,000 to pay for financial or business advice from an independent consultant.
The National Council of Rural Support Trusts and New Zealand Bankers' Association have recently signed the agreement for the Fund. Under the agreement, the RSTs will provide up to $3000, depending on an assessment of need, and the relevant bank will match that dollar for dollar.
The drought has put pressure on many businesses – reduced income, additional costs for purchased feed, or lower stock performance affecting FY21 earnings. Getting some independent advice and taking early action can preserve options.
RST National Council chairman Neil Bateup says the fund is for a farmer who is feeling pressure. "This might be because there's been some change, or their bank has indicated they need to discuss their debt situation. The hope is that there may still be options available so that the wishes of all parties can form a solution for going forward."
"There's a recognition it's in everyone's best interest for a farmer to have up-to-date business and financial plans," says New Zealand Bankers' Association chief executive Roger Beaumont. "This will inform conversations between the farmer and their bank."
Farmers can apply through the Rural Support Trust which will take an application from, or on behalf of, a farmer who might qualify for assistance.
The consultant will provide a report, which will be given to the farmer and their bank.
This initiative involves ASB, ANZ, BNZ, Heartland Bank, Rabobank, SBS Bank, TSB and Westpac.
■ The Farm Debt Mediation Scheme is designed to help financially distressed farmers by providing an independent, constructive and timely process for them to work through debt problems with creditors. It has been fully operational from July 1.
Mediation provides for a structured, confidential and impartial negotiation process. It allows the mediator, as a neutral and independent person, to help both the farmer and creditor work through debt issues in an effort to reach agreement.
The scheme makes it compulsory for secured creditors to offer mediation to eligible farming and primary production businesspeople when they default on payments, before taking any enforcement action. Farmers can also independently request mediation at any stage. A request must be made in writing from one party to the other.
Once accepted, farmers and creditors will have up to 60 working days to complete the mediation process unless both agree to extend this. Where possible, a mediation agreement is produced at the end of the process. This sets out the actions for future management of the debt. It must be agreed to by both sides and is binding. If a mediation agreement can't be reached, the parties can apply to get a determination on whether enforcement or a prohibition action can proceed or not.
A mediation report will be written by the mediator at the completion of a mediation and will be provided to the Ministry for Primary Industries (MPI) and both parties. The report will not contain any private details of the mediation agreement but will give an account of the mediation process followed. Either party can apply for an administrative review if they have concerns over the mediation process. Two Approved Mediation Organisations, The Arbitrators and Mediators Institute of New Zealand (AMINZ) and Resolution Institute (RI) have been appointed to train, authorise and oversee the mediators. The scheme is administered and monitored by MPI.
Mediation provides a safe environment for farmers to work constructively with creditors through debt problems. Mediation can give the parties options for turning things around and even if it can't save the farm business, it can help facilitate a dignified exit for farmers. The scheme means a more level playing field for farmers to tackle financial issues, as there's often seen to be a significant "power imbalance" when dealing with creditors. Lenders also support the need for a transparent and timely process to work through farm debts.
The scheme aims to promote the long-term viability and resilience of farm businesses. This will also help the primary sector as a whole.
Helping farmers manage financial stress promotes positive mental health and resilience in rural communities.
The scheme is open to those involved in a "primary production business." This means anyone primarily producing unprocessed materials, e.g. through agriculture, horticulture, aquaculture or apiculture farming activities. Sharemilking is also included.
The scheme covers debts owed by any eligible farm business, and include loans secured against farmland, farm machinery, livestock, and harvested crops and wool.
It won't however be available to "lifestyle" farming, forestry, mining, wild harvest fishing, or the hunting or trapping of animals. Businesses that primarily provide materials or labour services are excluded.
The average cost of farm debt mediation is around $6000. Under the scheme, farmers and creditors share this equally but the maximum farmer contribution is $2000. After this point, the creditor will have to meet the balance. This helps to ensure fair and reasonable access to mediation for financially struggling farmers. Farmers who are facing extreme hardship may apply for help from the Mediation Hardship Fund through either the Rural Support Trust or MPI.
If you wish to discuss this further, contact your accountant, farm adviser or East Coast Rural Support Trust, co-ordinator Jane Tylee 027 367 3672.