Farmers and small business owners work long hard hours, battle bad seasons and government policy to make ends meet, often to eke out a fairly modest profit for their trouble. The area that often lies outside their field of expertise is borrowing. It is something they do only a few times in their lives and many see it as a bit like going to buy a piece of equipment. “ I’ll go and buy a loan today,” they say.
Nature of a mortgage Problem is that a mortgage loan is not like that at all. For a farmer, it is like taking on a new stud bull, ram, stallion or enterprise. For a business owner it is like taking on a new branch, process, product or service. There can be very long-term and severe consequences of bad decisions. There are masses of terms and conditions to a mortgage loan, the legal impact of which on the borrower’s farm, home, family or business cannot be accurately predicted because the future cannot be accurately predicted. Questions to be considered include , ‘What if I get seriously ill, or die? What if a recession, fire flood or drought hit me? What if my family breaks up? What if someone defrauds or cheats me of a lot of money? What if government policy or input prices change dramatically? What if my profits turn into losses for a year or so? What if I cannot meet payments on time? What if the bank forecloses, appoints receivers and managers, auctions my home, farm, business premises and it does not cover all the debt? Is my loan insured? Who does the insurance cover, me or the bank?
Banks have changed Banks are not like they used to be. You only have to look at their billion-dollar profits and multi-million dollar executive pay packets earned mainly from their customers to know that they are not primarily there to help you as their TV ads say. They are there to make as much money for themselves out of your loan as possible. That means that just as you need to be on the alert every time you hop onto a horse or bike to muster stock, deal with a bull or stallion, handle an industrial dispute, tender for a job or manage a tax investigation, you need to be very alert when applying for a loan and before accepting any loan offer. There may be traps you do not expect and do not see. All over Australia for nearly four decades our bank loan specialists have helped borrowers deal with those unexpected traps, the receivers and managers, tough times that need loan re-sets. We always recommend that the borrower gets legal advice as well, but legal advice is not enough on its own. Financial aspects are critical.
Paying it back When you go for a loan, see it as a major exercise. Remember that no matter how difficult getting the loan may be, as a wise farmer once told me, “Borrowing is the easy bit. It’s the paying it back that’s hard.”
The easier path Borrow Better has been established so that farmers and business owners can easily obtain the best and most suitable loans in the first place. GBAC was converted from a nation-wide Chartered Accountancy practice in 1990 to help borrowers, following the disasters that bank de-regulation brought down on so many of them with Swiss Franc loans. It provides easy inexpensive ways to manage loans so that they do not get out of hand and dispute resolution services including mediation and negotiation with bankers. We have never come across bank loan problems that cannot be satisfactorily resolved. But we have seen many that have been mis-managed, just as there are plenty of times a muster, budget, machine or software can let us down. There is right way and a wrong way to deal with a bank loan problem or debt dispute with a lender. In many cases it is more about strategy than the loan itself.
Trust can be dangerous As a teen I was taught to “never trust a bull or stallion” and though the stud bulls we sold were very quiet, I never have. Nor would I ever trust a banker. No matter how good your broker or banker is, loan recovery actions will ultimately be determined by unseen and unknown directors, risk managers and debt collectors. Be well prepared and stay alert when dealing with mortgage loans. They put your biggest asset at risk, hopefully to benefit you!