Dairy farmers are good with land and animals and turning grass into milk. Accounting is a necessary distraction, as is securing finance, which often requires a trip into town and a nervous chat with a lender. Luckily for Colin and Chelsey, Figured Lending answered the call. The loan application process is 100% online. Just the thing for busy farmers.
This is Colin and Chelsey's first foray into contract milking. Colin has been dairying for 20 years, including close to a decade managing farms, most recently an irrigated 220-hectare block with 650 dairy cows. Chelsey also has 6 years of experience in dairy farming.
"We've always wanted to go contract milking, but it’s a struggle to find a decent farm and the right income – the stars have to align,” they said.
Feeling good about their overall position, Colin and Chelsey meticulously examined a few contract opportunities, but they didn’t quite hit the mark. Then a farm consultant they'd met put them on to a winner.
“We drilled down hard on actual business expenses and what was really achievable with the farm," Colin said. "There's lots to consider when going contract milking - not just contract price. We factored in the current economy and the cost of doing business in that climate of increasing expenses. Interest rates were another factor. The Figured Lending package was by far the best by 1% p.a.”
Colin and Chelsey were offered the contract to milk 900 cows, including 200 over the winter, on a 450-hectare farm in Tuatapere (NZ’s sausage capital), Southland.
He declined the farm owner’s offer of financial assistance for the first season. “We wanted total transparency, plus it’s good knowing we don’t owe money, because it can muddy a relationship,” they said.
The couple had to cover wages for four-and-a-half labour units over the four months from the contract start to the first September milk payment (an income gap typical of a spring calving-only system) - by their estimate an $80-90,000 commitment. They also had to cover vehicles and calving equipment purchased from the farm owner. However, winter milking would ease the financial burden.
Looking to access a six-figure line of revolving credit, Colin heard the name Figured Lending and applied online. “I’m old school – I’ve been using Excel spreadsheets for cashflow forecasts for years. I just jumped online and banged in the information – very simple,” he said. “No need for a nervous chat with a lender."
Colin entered a few details online to initiate his funding application. The next day he received a call from Figured Lending.
Figured Lending loans are only available to active users of Figured - the cloud platform for farmers and their advisors to plan, track, and report farm financial performance.
Colin wasn’t an active Figured user, but that was quickly resolved. During a phone call with Figured’s lending advisor, Colin’s Figured account was activated and he was shown how to set up the milk tracker to complete a 12-month cashflow budget. An hour later, Colin had finalised his budget in Figured and submitted his lending application for review.
In the background, Figured reads the budget to ensure expenses make sense and benchmark numbers stack up with production forecasts. This information is sent to Figured’s wholesale lending partner (in this case Heartland Bank), who manages credit and AML compliance checking.
C & C Dairies' loan application was approved in three days.
Colin and Chelsey will draw down their first sum to cover a few capital expenses at the commencement of his contract. They'll pay 9.95% p.a.* on the draw down amount, with expectations that the full loan amount will be repaid within 12 months.
“It’s a reasonable rate for revolving credit,” says Colin. “Plus, you’re only charged interest on the amount you use.”
*This was the interest rate available at the time of application. Updated to 10.95% on April 18, 2023.
New to contract milking, and a dab hand and cashflow forecasting, Colin killed two birds with one stone – simultaneously activating his Figured account to help manage his farm business finances and secure a loan.
Colin’s first impressions of Figured’s features and user interface are extremely positive.
“The milk trackers and planners are nice and simple,” he said. “Figured will save me from playing around in Excel spreadsheets – even if my budgets and cashflow forecasts are pretty comprehensive.”
Colin and Chelsey also see the potential for Figured in other parts of their farm business management. “When you have everything in one place, and it’s tracking my milk and popping out data to see whether we’re ahead or behind the month, it’s good for forecasting other things you can do in the business,” he said. “And when the accountant has the same info, there’s no fumbling through spreadsheets and this and that. Everything ties in with Xero.”
