01
Equity in the land
The proportion of the property value the business owns outright. It sets the ceiling on what can be borrowed and it is the first number a rural lender looks at.
Rural finance
The debt that sits under everything else.
Term debt secured on the land is the largest and longest commitment a farming business carries, and the structure of it decides how much room the rest of the operation has.
Last reviewed 8 September 2026
Indicative repayment
Weekly
$2,340/week
$10,138 /month $108,292 total interest
$500,000
$5,000 $500,000
5 years
6 months 5 years
8.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $500,000 scenario
5 years at 8.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
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The short version
Five lines about the core debt.
- It is secured on the land. A mortgage over the property, which is what produces the lowest rate available to a farming business and the largest consequence if it fails.
- The repayment structure matters as much as the rate. A schedule that ignores the production calendar puts pressure on the business in the months it has least income.
- Interest-only is a tool and a warning. It creates room in a development phase and it is a signal when it persists, because nothing is reducing.
- Lenders assess the land, the operation and the operator. Equity, production history and management all carry weight, and the third is weighted more heavily in rural lending than elsewhere.
- Indicative only. Every figure here is illustrative. Actual rates, terms and structures come from the lender after assessment.
The structure
Four decisions that shape the facility.
The amount is sized against the value of the land and the equity the business holds in it, and against what the operation can service from its production. Those two constraints bind at different times, and a facility comfortable on equity can be uncomfortable on servicing in a poor season.
The term is long, and it is ordinarily subject to periodic review rather than fixed for its whole life. That distinction matters, because the loan may run for twenty-five years while the lender reassesses the arrangement every few years within it, on terms set out in the agreement.
The rate is fixed, floating or split between the two. Fixing part of the debt provides certainty on the portion fixed and removes flexibility on it, and break costs on a fixed portion repaid early can be substantial. A split is the ordinary compromise and the proportions are worth deciding rather than defaulting.
Amortisation is the fourth and the one businesses think about least. A facility repaying principal reduces every year, and one on interest only does not, and the difference across a decade is the difference between a business that owns more of its land and one that owns the same amount of it.
Amount
Against land value and equity
Term
Long, and reviewed
Rate
Fixed, floating or split
Amortisation
Principal, or interest only
Worked example
What principal repayment is actually worth.
A farm carries $2m of term debt at an indicative 8%. On interest only, the annual cost is $160,000 and the balance in ten years is $2m. On a twenty-five year table structure, the annual cost is roughly $185,000 and the balance in ten years is around $1.6m.
The difference in annual outgoing is about $25,000, which in a tight year is a real amount and is frequently the reason interest-only is chosen. The difference in position after ten years is about $400,000 of debt repaid, which is a different kind of number entirely.
Neither is wrong. Interest only during a development phase, where the spending is producing future income, is a sensible use of the structure. Interest only as a permanent arrangement is a business that has stopped repaying its land, and the ten-year figure is what makes that visible.
Illustrative figures
- Term debt
- $2,000,000
- Indicative rate
- 8%
- Interest only, annual
- ~$160,000
- Table over 25 years, annual
- ~$185,000
- Balance after 10 years, interest only
- $2,000,000
- Balance after 10 years, table
- ~$1,600,000
Illustrative on stated assumptions and rounded. Not a quote or offer of credit.
What a lender assesses
Five things behind a rural term facility.
A general description rather than any lender’s criteria, which are their own and vary considerably.
02
Production history
What the farm has actually produced across several seasons, not a single strong one. Rural lenders read a run of years because the variation between them is the point.
03
Servicing from production
Whether the operation covers the repayments from what it earns, tested against a conservative payout or price rather than a recent good one.
04
The operator
Experience, management practice and succession position. This carries more weight in rural lending than in most sectors, because the same land in different hands produces different results.
05
Environmental and regulatory position
Consents, nutrient limits and compliance obligations affect what the land can produce and therefore what it can service. Lenders assess them as part of the value rather than separately.
The structure decision that matters most
Repayments timed against the production year rather than the calendar.
A farm receiving most of its income in a few months and repaying its term debt in twelve equal instalments is funding the off-season out of a facility or out of reserves. Rural lenders understand this and will frequently structure repayments seasonally, with larger amounts in the months income arrives and smaller ones between. That has to be asked for, because a standard schedule is the default, and the difference it makes to a farm’s year is considerably larger than a small movement in the rate.
Rate structure
Fixed, floating and split.
A decision most farms make once and revisit rarely, and one where the right answer depends on the position rather than on a view about rates.
| Feature | Fixed | Floating | Split |
|---|---|---|---|
| Certainty of cost | High for the fixed period | None | Partial |
| Ability to repay early | Break costs may apply | Ordinarily free | On the floating portion |
| Benefit if rates fall | None until it rolls | Immediate | Partial |
| Exposure if rates rise | None until it rolls | Immediate | Partial |
| Suits | A tight servicing position | A business with surplus cash | Most farms |
Where servicing is tight, certainty is worth more than optionality and a larger fixed proportion follows. Where the business regularly has surplus to apply, floating preserves the ability to use it without break costs.
The process
What arranging or refinancing term debt involves.
Generalised rather than specific to any lender. This is the heaviest application on the site.
01
Financial and production information
Several years of financial statements, production records, a budget for the coming season and a cash-flow forecast. Rural lenders read a run of seasons rather than one, and presenting the variation rather than the best year is more credible.
Documents commonly required
- Financial statements, several years
- Production records
- Season budget and cash flow
02
Valuation
A registered valuation of the property on a basis the lender accepts, which for rural land takes longer than a residential valuation and is more expensive. Starting it early is the largest single influence on the timeline.
Documents commonly required
- Registered valuation
- Title and consent details
03
Structure and terms
The amount, term, rate structure, amortisation and the repayment timing. This is negotiated rather than offered, and the repayment timing is the part most worth attention.
04
Security and settlement
A mortgage over the land, ordinarily with a general security agreement over the business as well. Where livestock or plant carries separate finance, the priority arrangement between lenders has to be resolved.
Documents commonly required
- Mortgage documents
- Security documents
- Priority arrangements
No timings appear here. Rural refinancing takes longer than most business lending because of the valuation and the volume of information, and a lender will state its own expectation.
When it tightens
Three situations worth understanding in advance.
A poor season against a fixed schedule
Production or price falls and the repayment schedule does not. The business meets it from reserves, from a seasonal facility or not at all.
What happens:Pressure that compounds if the following season is also poor, which in farming is a realistic rather than a remote scenario.
A review reduces the facility
A periodic review conducted after a difficult period results in tighter terms, a requirement to reduce debt, or a demand for additional security.
What happens:A structural change arriving from the lender rather than from the farm, on terms set out in the agreement.
Enforcement is contemplated
Where a facility is in default, New Zealand law requires a lender to offer mediation under the Farm Debt Mediation Scheme before taking enforcement action against farm property.
What happens:A statutory process with a defined shape, which is covered in its own guide and is a genuine protection rather than a formality.
The third of these is specific to farming and is worth knowing before it is needed. The Farm Debt Mediation Scheme obliges a lender to offer mediation before enforcing against farm property, and the guide on this site sets out what that involves.
The honest position
Term debt is structural, and it is worth revisiting.
The core facility is frequently the arrangement least examined on a farm, because it is large, it was set up years ago and changing it involves valuations and legal work. That inertia is expensive when the structure no longer matches the business.
The questions worth asking every few years are whether the repayment timing still matches the production year, whether the fixed and floating proportions still suit the servicing position, and whether the amortisation reflects what the business intends. All three change as a farm develops and none of them changes on its own.
None of that is a suggestion to refinance frequently, which carries real cost. It is a suggestion to review deliberately, with the accountant and the lender, on a cycle rather than in response to a difficulty.
Refinancing
What moving a rural facility actually involves.
Moving term debt between lenders is a larger exercise than in most sectors. A new valuation, full legal work on the security, a fresh assessment of several years of production and the resolution of any other security positions all sit in it, and the costs are substantial enough to be part of the decision rather than an afterthought.
That means refinancing is worth doing for structure more often than for rate. A facility whose repayment timing no longer matches the production year, or whose term no longer matches the assets it funded, is worth restructuring even where the rate is fine. A facility that is well structured and slightly expensive frequently is not.
The other consideration is the relationship. A rural lender that has held a farm through a difficult season knows the business, and that knowledge is worth something at the next difficult season. Moving for a small margin and losing it is a trade worth making deliberately rather than by default.
The trade
What land-secured term debt gives and costs.
What it gives
- The lowest cost of debt available to a farming business
- A term long enough to match an asset that produces for generations
- A repayment structure that can be shaped around the production year
- Capacity to fund development that no shorter facility would carry
- A single relationship covering the largest part of the balance sheet
What it costs
- A mortgage over the thing the business depends on entirely
- Periodic reviews at which terms can change
- Break costs on any fixed portion repaid or restructured early
- Servicing that continues through a season the farm did not choose
- Refinancing costs substantial enough to discourage revisiting the structure
The repayment
What term debt costs to service.
The calculator runs the ordinary amortising arithmetic. Rural term debt is frequently larger and longer than the ranges here, so treat this as the shape rather than the scale. Indicative only, and not a quote or offer of credit.
Indicative repayment
Weekly
$2,340/week
$10,138 /month $108,292 total interest
$500,000
$5,000 $500,000
5 years
6 months 5 years
8.00% p.a.
8% (secured) 30% (unsecured)
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $500,000 scenario
5 years at 8.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
References
Sources
- Reserve Bank of New Zealand, agricultural lending statistics
The published source for New Zealand rural lending aggregates and rate context.
- Farm Debt Mediation Act 2019
The statute requiring mediation to be offered before enforcement against farm property.
- Ministry for Primary Industries
The agency responsible for the Farm Debt Mediation Scheme and for rural sector policy.
- Personal Property Securities Register
Backs the description of security over livestock and plant alongside a land mortgage.
- Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.
FAQ
Farm term loan in New Zealand, questions answered
What is farm term debt secured on?
Ordinarily a mortgage over the land, frequently alongside a general security agreement over the business. That security is what produces the lowest rate available to a farming business and the largest consequence if the facility fails.
How long are rural term loans?
Long, commonly measured in decades, and ordinarily subject to periodic review within that period. The loan running for twenty-five years and the lender reassessing the arrangement every few years are two different things and both are normal.
Should repayments be seasonal?
On a farm with concentrated income, frequently yes, and it has to be asked for because an even schedule is the default. Matching repayments to when income arrives makes more difference to a farm’s year than a small movement in the rate.
Is interest only a problem?
It is a tool during a development phase, where spending is producing future income. It becomes a signal when it persists, because the business is not reducing its debt and the position after a decade is unchanged.
Fixed or floating?
It depends on the servicing position rather than on a view about rates. A tight position values certainty and favours a larger fixed proportion; a business with regular surplus values the ability to apply it without break costs and favours floating.
What are break costs?
A charge that can apply where a fixed portion is repaid or restructured before its term ends, reflecting the lender’s cost of the fixed funding. They can be substantial and they are the reason fixing removes flexibility as well as risk.
What does a rural lender assess?
Equity in the land, production history across several seasons, servicing tested against conservative prices, the operator’s experience and management, and the environmental and regulatory position of the property.
Why does the operator matter so much?
Because the same land in different hands produces different results, and rural lenders have long experience of that. Management practice, succession position and experience carry more weight here than in most other lending.
How long does an application take?
Longer than most business lending, largely because of the valuation and the volume of information involved. This site does not publish timings, and a lender will state its own.
What is the Farm Debt Mediation Scheme?
A statutory scheme requiring a lender to offer mediation before taking enforcement action against farm property. It is a genuine protection with a defined process, and it has its own guide on this site.
Should term debt be reviewed?
Deliberately, on a cycle rather than in response to difficulty. Whether the repayment timing still matches the production year, whether the fixed proportion still suits the position, and whether the amortisation reflects what the business intends all change over time.
Is this page financial advice?
No. It describes how a facility works in general terms. This site is not a lender, a broker or a registered financial adviser, and what suits a particular farming business depends on facts a website cannot see.
Related
Related reading
Rural property finance
Where the term debt usually starts.
Read onSeasonal finance
The facility that carries the year between payments.
Read onHow NZ rural lending works
Who lends, and how a farm file is read.
Read onThe Farm Debt Mediation Scheme
What the statute requires before enforcement.
Read onAll eight kinds of finance
Every rural facility compared in the same shape.
Read on