Talking to the bank early

The best time to talk to the bank about a problem is before it happens. Banks don't like surprises. A credit officer who hears about trouble from you, with a plan, has something to work with. One who finds it on their own starts asking harder questions.

Keep in touch in good years too

Regular contact builds trust. Send your management accounts when the bank asks for them, tell your bank manager about big changes, and invite them out to the farm. When a poor season comes, you'll be someone they know, not just a file.

When to ring

Ring the bank as soon as your cashflow shows any of these:

• the overdraft going past its limit in a coming month
• a covenant likely to be missed
• a repayment you may not be able to make
• the review pack running late

What to bring

Bring your updated cashflow, a short explanation of what's changed, and your plan. A plan might mean selling some stock earlier, putting off a purchase, asking for a seasonal increase in the limit, or a period of interest only. Interest only means you pay just the interest for a while, so the loan balance doesn't fall. What the bank agrees to is up to the bank, and each case is different.

If things are tight

The Banking Code of Practice asks customers in financial difficulty to contact the bank as soon as possible. Under the Code, a bank won't charge default interest on a farmer's loan while the land is in drought or a natural disaster, though you may need to tell the bank about it. Default interest is a higher rate charged while a loan is in default.

You don't have to do this alone. The Rural Financial Counselling Service helps primary producers in financial hardship, or at risk of it. It offers free and independent financial information, options, decision-making support and referrals. It's funded by the Australian and state governments, and the national number is 1300 771 741.

The habit that helps most

Keep your cashflow current every month. It's what turns a surprise into a conversation months ahead. Our course on your first farm cashflow shows how. The interest rate change calculator shows what a rate rise would do to your repayments, so you can raise that early too.