Leasing, sharefarming, coinvestment and equity management are all possibilities beyond the traditional mortgage and some, advisors say, have real benefits for owners as well as buyers.
One of the most common is leasing. In fact, Rural Bank head of sales Andrew Smith said around 30 per cent of the area farmed by its cropping clients is leased, a figure that has gradually increased over time.
While leasing is not new, advisors say the old rules of thumb where payments equal 5-7 per cent of the land value no longer apply.
Duncan Ashby, a farm advisor and accountant who has authored a book about leasing, was blunt.
"I think, at the minute, leasing and sharefarming have huge potential but people need to come to terms with what's a fair lease price and and not have any sort of idea that is linked to the land price," he said.
Instead, Mr Ashby recommended the lessee and landowner each take half of the enterprise's gross margin.
"You're leaving a bit of profit for the tenant as well as a fair price for the landowner," Mr Ashby said.
Sharefarming anew
If landowners wanted more control over the running of the enterprise, Mr Ashby said a sharefarming or contract sharefarming agreement was a good alternative.
"Contract sharefarming allows for the landowner to have a say on what's happening on the property, and they are actually then a primary producer as a result, whereas if they leased land out, they're not a primary producer," he said.
Contract sharefarming pays the landowner close to the normal lease amount and the active farmer a figure representing their contribution as a if they were a contractor on the property. Any surplus is then divided largely in the favour of the farmer.
Mr Ashby said the model had several advantages over normal leasing arrangements.
The landholder remained a farmer for tax purposes, while it provided an entry point for new farmers. It also provided significant incentives for both parties to work in a common interest.
Equity management
Finding a common interest is also at the heart of equity management positions that farm advisor Neil Lane is arranging for a large Victorian dairy farm.
The landowners would continue to own 100pc of the land but offer the management team vendor finance to buy into the operating entity that holds the cattle and machinery.
Eventually, that operating entity could also buy more land to grow the business.
"Everybody's pulling in the one direction, you're all shareholders in the in the company that makes the milk and grows the grass so all the parties are much more aligned," Mr Lane said.
"It means that they are likely to retain good management because they're building some wealth along the way.
"To be blunt about it, I think most people who are our age or a little bit older have forgotten how they got started in farming. They don't want to share the spoils."
Equity investors
Of course, not all landowners having farming backgrounds.
Whether it is Hewitt Cattle Company buying Tubbo Station with the backing of Canada's giant superannuation fund or Montague Orchards expanding into citrus on land purchased for it by Primewest, there are plenty of examples of the big getting bigger with the support of the big end of town.
Oxley Capital Partners managing director Ben Craw said many investors valued the skills of already successful farmers.
"Best of breed management platforms or a family enterprise can be very attractive," he said.
"If you look at the Canadian PSP model for example, they've really got behind a lot of large family operators to capitalise them, and then expand and create scale on that base."
It's not limited to large farm businesses, either.
Businesses like Cultivate Farms are matching private investors with new farmers eager to get a toehold in the industry. One of the investments it recently facilitated was for just $200,000.
Government leg-up
There's even a more traditional mortgage aimed specifically at new farmers.
Backed by the federal government, the Regional Investment Corporation's AgriStarter loans assist first time farmers and support succession arrangements.
Up to $2 million can be financed, with the first five years' interest-only, followed by five years' principal and interest, often with the residual amount to be refinanced after 10 years.
Half of the total debt must be with a customer's commercial lender or a loan on commercial terms.
RIC chief executive Bruce King said interest-only terms for the first five years helped new farmers pay down principal with their bank and build equity or their cash reserve to purchase more land or stock.
The AgriStarter loans also offer concessional interest rates and no application fees or fees for early repayment.
"In this low interest rate environment, the RIC's 2.17pc is comparable for existing farm businesses who have the leverage to negotiate good terms with their bank, yet a new farmer may not be able to secure this interest rate, interest only period or 10-year loan terms with their bank, which is where we can assist," Mr King said.
The AgriStarter loans are also available to new farmers who have recently purchased or established a new farm business.
"All loan applications will be assessed based on their own financial circumstances yet as a rule of thumb we generally take recently to mean within the past three years," Mr King said.
So far, more than 10 AgriStarter loans have been approved valued at around $7 million as at 31 July 2021, with $500 million allocated for all RIC loans funding this financial year.
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