Dealing With Debt

Credit management and farm debt mediation are two terms that no rural business wants to be associated with but as Rural Financial Counsellor Richard Lewis explains they don’t need to be the last terms your business hears.

Essentially if your bank account has a problem the bank manager will send it to the bank’s hospital paddock and no business will stay there long, if you haven’t already, call a RFC as a priority.

The reason why your accounts have been flagged is often one of these reasons;

• Poor servicing or failure to pay regularly
• Several occasions of missed payments
• Your financial products are outside the regulated APRA guidelines
• A significant drop in equity

Any of these instances could have happened by events outside your control, like drought, poor prices or some within your control such as poor decisions or excess spending.

Banks go into credit management to help you repair your position and not to take your farm, although repossession can be a result.

A rural financial counsellor can help you through this time by:

• Helping you understand your position, essentially how things have come to this
• Explain how the bank sees your situation and why you are in credit management
• Help you to fully understand and accept your position
• Assist you in developing a strategy that is achievable for you, and acceptable for the bank to get your loan back on track

Your RFC will sit down with you and do the number crunching, explaining what those numbers mean and work out what kind of options are available to you.

Rural Financial Counsellors have been here with clients many times before so they know what it likely to be acceptable for the bank and what you really will be able to achieve.

But it is critical to get an RFC in your corner as soon as possible, the sooner you do the more options they’ll be able to find for you.

At this stage one likely outcome would be for the bank to record this as a Deed of Agreement or simply to restructure your loan.

If this can’t be achieved the bank could opt for an informal mediation, where you, your advisors, RFC and the bank sit down at the table for a day and try to work out an agreement which is documented.

Alternatively, the bank could send you a formal notice, inviting you to a farm business debt mediation.

This is official under the act which means you should respond, it’s a process the bank must take before it can take any action against you like liquidation or repossession.

If you receive one of these formal invites and you haven’t already engaged a rural financial counsellor and a solicitor, it is extremely advisable to do so now.

The Rural Financial Counselling service is free and so is the Farm and Rural Legal Service provided under Legal Aid Queensland.

Together we will work with you to put forward your best position to the bank with you.

The most important thing to know is credit management is not the end.  It could be the beginning of better structured debt and the sooner you involve an RFC the more options you have and sooner we can help you before you get to the hospital paddock.