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3 considerations before venturing into the agribusiness

Published on November 20th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Know the risks

Whether you are going into the Agribusiness purely for business purposes and the attractive tax benefits that come with it, or for the ability to make money off of something that you love it is vital to know the risks that come with starting your own venture. There will be situations that will be out of your hand, but it is important that you have a backup plan to cover you for emergencies or shortfalls. For example, some of the risks that come with the Agribusiness are:

  • The fluctuation of market prices
  • Crops failing
  • Investment may go wrong
  • Livestock or plants could lose their value

Creating an emergency fund

Australian farm businesses are dependent on various factors to help it grow and flourish. Australian farmers export about 77% of what they grow and produce and the farm production is forecasted to increase by 1.5% to a whopping $61 billion. However, the success of your business may hinge on seasonal changes, financing, and conditions in the overseas markets as most of the agricultural economy rely on exports.

Having an emergency fund set up to take care of these shortfalls can be beneficial. There are also commercial loans you can access to cover emergencies and other business expenses that your budget is unable to cover, such as business loans of $30,000 or more. Remember to compare your options or speak to a financial advisor to find something that will be beneficial to your situation.

To purchase new or used?

As you may have figured out, there are many expenses to juggle when it comes to kickstarting your business. There are also financial decisions that need to be carefully considered as this could affect the overall operation of your business. Choosing between new or used equipment such as a tractor, will depend on many factors such as the cost of equipment and the way in which you will be operating your business.

New equipment can come with the benefit of having the latest models to help run your business more efficiently, but it can also come with a hefty initial cost. Used equipment, on the other hand, can be a cost-effective way to go for people who have a tight budget.

If you are planning to own the equipment outright, you could be faced with the issue of having to do frequent repair and maintenance costs for a used equipment. Weighing the pros and cons that come with each option can give you a more clear-cut decision when it comes to choosing something that is cost effective.

Speaking to a financial advisor or a broker when it comes to choosing an agriculture finance option that is suitable for you can be useful in finding a solution that won’t force you into a debt spiral. It can also be beneficial to highlight the costs of your business you may have not yet considered.

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