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Simple but effective finance options the key for wineries
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One of the most important factors for wineries to consider when looking at finance options is how they fit the structure of the business – and that should suit you, not your banker.
It often takes time to match products to your present and future needs, and you should be wary of anyone trying to set up just one facility as a way to save paperwork.
Financial packaging shouldn’t be complicated, but there are several basic facilities needed to cover short- and long-term funding needs such as paying growers, capital investment and inventory that has to be held for years.
Always be prepared to ask questions and get a range of options explained to you, as there can be a significant economic cost to exiting the wrong product or structure.
There are basic principles that apply to agribusiness (and other types of finance) which you should consider – and the bank will certainly look at.
One is that the aggregate borrowing limit is based on your capacity to service debt, and the repayment schedule suits your business’ capability and seasonal cashflow. The loan term needs to provide you with some assurance of ongoing finance, and the types of accounts should be matched against the purpose and provide management focus.
The type of accounts and facilities used by most wineries include:
Farm Management Account (or overdraft)
Flexible Bill Facility
While conditions in the wine industry are making it difficult for some wineries at the moment, the current circumstances need not necessarily affect the ability of wineries to apply for finance. And, as with any agricultural product, the cycle will turn in the next few years and buoyant times will again be experienced, so there is always cause for a reasonable level of optimism if finances are managed prudently during this period.
A business plan is one of the key documents, and will need to outline the goals of the business as well as the business and management background of the owner/operator and key personnel. A thorough understanding of market conditions will need to be demonstrated, including threats and opportunities and the state of the competition. The plan should also cover supplier, packaging and distribution arrangements.
A succession plan will ensure everyone knows who will run the business if you cannot for any reason, and it’s also important to have appropriate levels of insurance.
For those looking to change banks or expand their operation, it’s important to make sure their banker has appropriate experience in the industry. National Australia Bank (NAB) has Agribusiness Managers in all grapegrowing regions who understand the industry and recognise the impact of seasonal conditions that can have a dramatic effect on performance.