Boosting cash flow to support farm drought recovery

Martin and Helen Kinsela Canowindra
Kinsela Agriculture's Martin and Helen Kinsela applied for a RIC loan.

Martin and Helen Kinsela took advantage of RIC’s farm loan concessional interest rate to ease financial pressure on their cattle and cropping business during recovery from drought.
Martin’s family has been involved in broadacre cropping, hay production and livestock just outside Canowindra in Central West NSW for three generations and over time he partnered with his parents and more recently, wife Helen through family succession arrangements. 

The husband and wife partnership currently produces barley, wheat, canola, lucerne hay and cereal hay across almost 3000 hectares, plus a mix of Hereford cattle, Angus breeders and Angus cross traders.

Martin said he couldn’t imagine doing anything else.

“I’d come home from school and the first thing I’d change my clothes and go to the farm and I’d find myself a job to do,” he said. 

“I grew up loving machinery and everything about cropping.”

Wheat crop paddock
During recent drought, the Kinselas focused on hay production and are looking forward to the upcoming wheat harvest.

During the past 10 years, the Kinselas’ cattle mob has grown to 200 cows and their progeny and they have also broadened contracting operations to harvesting, sowing, spraying, speed tilling, hay making and hay sales, transport and trading.

After refinancing part of their existing debt to a RIC loan, with its concessional interest rate determined by the 10-year Australian Government bond rate rather than the cash rate, the couple eased financial pressure on their business at a time when dramatic cost increases had hit all aspects of farming.

“The loan has certainly given us some respite from these heavy interest rates that are on at the moment,” Martin said.

Investment during drought recovery

Heavily affected by drought in 2018 and 2019, the Kinselas had destocked to fewer than 40 cattle and with cropping outlooks uncertain, they decided to focus on hay production rather than taking their crop through to grain. 

“During 2019 when it really pinched, anything that wasn’t going to make the grade as a grain – whether that was canola, wheat, barley – we made the decision to put it in a bale because then at least we had an option,” Helen said.

“So we baled everything and we expanded our hay trading operations, selling, buying and carting hay – we ended up as far as South Australia delivering into Queensland.” 

Securing a RIC loan enabled the Kinselas to refinance part of their debt and replace their old, makeshift cattle yards with permanent yards, which cater for more cattle. The new yards also provide scope for future expansion.

Cattle yards
The Kinselas built new cattle yards with their RIC loan.

“The original yards were bought when we first started and we’ve added to them and added to them,” Martin said.

“The RIC loan meant we were able to invest sooner, five years or more.”

“There’s been plenty of times we couldn’t get a truck in so we couldn’t go to the sale but now we’ve actually got the facilities and we can get B doubles in all the time,” Helen added.

Boost to cash flow

The Kinselas said the RIC loan was a debt management tool and the concessional interest rate had also eased the impact of RBA rate rises on their commercial debt following crop losses and higher weed and disease costs due to more recent floods in the region.

“It means we haven’t been hampered by cash flow all the time,” Martin said.

“There’s a lot of things we need to be doing and the only thing that stops you is having the money to pay for it.”          
Helen said it enabled them to spread their debt.  

“We can see on our cash flow budget exactly what we’re not paying and what we are paying and that gives us choices,” she said.

“We love a challenge and we like to grow, and we’re already thinking about our children. They can make their future knowing there’s something they can choose to come into.”

Cattle in paddock
The Kinselas run a mixture of Hereford cattle, Angus breeders and Angus cross traders.

All in the application

The Kinselas said given the complex structure of their business, providing detailed information was key to their application experience because their Agri Lending Specialist was able to understand their model. 

“For us, it was a relatively easy approval process,” Helen said.

“We spent a long time on extra pages of information about the different aspects of our business – you don’t have to tell your life story but include the detail that’s relevant and cover all bases.

“Sometimes you find the stuff that’s in your head when they ask for risk management plans and other plans is you’ve actually got it, it’s just a matter of putting it into a format that someone else can read, so don’t be daunted by it.”

RIC loans currently offer 10-year terms including five years’ interest-only payments and five years’ principal and interest.