01
The operating cost base
What the farm spends monthly through the production period, from last season’s actuals rather than from a budget. This is the rate at which the facility fills.
Rural finance
Everything is spent before anything is paid.
A farming year runs on a facility that fills through the spending months and empties when the income arrives. How deep it goes and whether it clears are the two numbers that describe a farm’s season.
Last reviewed 8 September 2026
Indicative interest cost
Weekly
$242/week
$1,050 /month $12,600 a year while drawn
$300,000
$5,000 $500,000
$140,000
Nothing drawn Fully drawn
9.00% 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 $300,000 scenario
$140,000 drawn at 9.00% . 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 season facility.
- It is the farm’s working capital. Drawn as costs are incurred and repaid when the income arrives, which on most New Zealand farms is a once or twice a year event.
- Interest runs on the drawn balance. So the cost is a function of how deep the drawdown goes and how many months it stays there, not of the limit approved.
- Size it on the deepest point. Which is ordinarily just before the income arrives rather than in the middle of the spending, and a facility sized on an average will be short.
- The floor is the number that matters. A facility that clears each season is doing its job. A floor that rises year on year is core debt forming inside a working facility.
- Indicative only. Every figure here is illustrative. Actual limits, rates and terms come from the lender after assessment.
The shape
What a season looks like on the facility.
Costs start before production does. Fertiliser, seed, animal health and repairs are incurred at the front of the season, and on most systems the facility begins drawing there rather than later.
Through the production period the drawing accumulates steadily, at roughly the rate of the operating cost base less whatever income arrives in the meantime. On a dairy farm receiving monthly payments that accumulation is partly offset; on a system paid once at harvest or sale it is not offset at all.
The deepest point comes immediately before the main income arrives, and that is the number the limit has to accommodate. Then the payment lands and the facility falls sharply, ideally to nothing, and the next season begins from zero.
Early season
Drawing begins
Mid season
Steady accumulation
Just before income
Deepest point
After payment
Cleared, ideally
Worked example
A $300,000 limit across a season.
A farm holds a $300,000 seasonal facility at an indicative 9%. Drawing begins in early spring, accumulates to about $240,000 by late summer, and clears when the main income arrives. The average drawn balance across the twelve months is around $140,000.
Interest for the year is roughly $12,600, plus a line fee on the limit. That is the cost of running the season on borrowed money rather than on retained earnings, and for most farms it is an ordinary and unavoidable operating cost rather than a sign of difficulty.
The comparison worth making is against the alternative, which is holding $240,000 of working capital in the business permanently. Very few farms have that available and are also using it well, which is why the facility exists and why it is close to universal.
Illustrative figures
- Limit
- $300,000
- Peak drawn
- ~$240,000
- Average drawn
- ~$140,000
- Indicative rate
- 9%
- Interest for the year
- ~$12,600
Illustrative on stated assumptions and rounded. Not a quote or offer of credit.
The number to record
The lowest point each season, written down beside the two before it.
A seasonal facility is judged on whether it clears rather than on how deep it goes. Recording the least drawn the facility reaches in each season takes two minutes a year and it is the earliest available signal that the season has stopped covering the year. A floor that has gone from zero to $40,000 to $85,000 across three seasons is telling the business something a set of accounts will not show as plainly for another twelve months, and it is telling it early enough to act on.
Sizing it
Four inputs that set the limit.
A limit sized from these is easier to obtain and considerably easier to defend at a review than one sized from a preference.
02
The timing of income
When payment arrives and in what pattern. A monthly payout partly offsets the accumulation; a single payment at sale does not offset it at all.
03
The deepest historical point
How far the facility went in the worst of the last three seasons, taken from the statements. That figure plus a margin is the limit worth asking for.
04
Tolerance for a poor season
A limit sized to an average season is short in a bad one, which is exactly when a limit increase is hardest to obtain. Building the margin in at the outset is cheaper than seeking it later.
The alternatives
What else covers the same ground.
Each of these funds part of the season, and most farms use more than one.
| Feature | Seasonal facility | Supplier and merchant credit | Term debt |
|---|---|---|---|
| Cost while drawn | Interest on the balance | Ordinarily nothing within terms | Interest on the whole amount |
| Available again next season | Yes | Yes, within the limit | No |
| Covers any cost | Yes | Only that supplier’s goods | Yes |
| Repaid when | Income arrives | On terms | On a schedule |
| Suits | The whole season | Inputs from a merchant | Permanent requirements |
Merchant and stock firm credit ordinarily costs nothing within terms and it covers only that supplier’s goods. Using it fully before drawing on the facility is the ordinary sequence and it is worth being deliberate about.
The trade
What the facility gives and what it costs.
What it gives
- A cost proportional to how much of the season is actually funded
- Repayment that happens automatically as income arrives
- Availability next season without a new application
- Tolerance for a payment arriving later than expected
- Very little cost through the months the facility is undrawn
What it costs
- Interest on every dollar for every month it is outstanding
- A line fee on the limit whether or not it is drawn
- A limit that can be reduced at review, ordinarily after a poor season
- Nothing forcing the balance down, so a floor can form unnoticed
- Security over the business and frequently over livestock as well
When the floor rises
What core debt inside a seasonal facility means.
A seasonal facility that no longer clears is carrying permanent debt at a working capital rate. The portion that never comes down is not seasonal at all, and it is being funded on a facility priced for fluctuation rather than on term debt priced for permanence.
The ordinary remedy is to term out that portion, converting it into a facility with a schedule at a lower rate and leaving the seasonal limit free for the season. Rural lenders deal with this regularly and will usually raise it themselves at a review, which is a worse sequence than raising it first.
The underlying question is separate and harder. A floor that rises across several seasons means the seasons are not covering the year, and no restructuring answers that. It is a farm-system and cost-structure question, and the earlier it is named the more options remain.
Through the year
What to watch while the facility is drawn.
A seasonal facility is drawn down across months rather than at once, which makes it easy to lose track of. Comparing the drawn balance against the budget monthly, rather than noticing at the end, turns a variance into an adjustment while there is still time to make one.
The variance worth watching most closely is timing rather than total. A payment arriving three weeks later than budgeted extends the drawdown at its deepest point, and it is ordinarily visible in advance from a payment schedule or a processor announcement rather than arriving as a surprise.
Repaying deliberately as income arrives matters as much as drawing carefully. Interest accrues daily, so money sitting in the trading account rather than reducing the facility is costing something for no benefit, and making the transfer part of the same routine as banking a receipt removes the decision entirely.
The trade
What a seasonal facility gives and costs.
What it gives
- Working capital available exactly when the production year needs it
- A cost proportional to how much of the season is actually funded
- Repayment that happens as income arrives rather than on a schedule
- Availability the following season without a new application
- The ability to buy inputs at the right time rather than when cash allows
What it costs
- Interest on every dollar for every month it is outstanding
- A line fee on the whole limit whether or not it is used
- A limit reviewed annually, ordinarily just after the difficult season
- Nothing forcing the balance down, so a floor can form unnoticed
- Security over the business and frequently over stock and produce
When it goes wrong
Three ways a seasonal facility fails.
The limit is reached before the income arrives
A facility sized on an average season meets a poor one, or a payment arrives later than budgeted, and the drawdown runs past the limit at the deepest point of the year.
What happens:An excess, a dishonoured payment or an urgent limit conversation at the worst moment, on a business that may be performing well.
The floor rises across seasons
Each season clears a little less than the last, so the facility never returns to zero and a permanent balance forms inside a working facility.
What happens:Term debt carried at working capital pricing, and a review conversation about core debt that the business did not see coming.
The limit is reduced after a poor season
A review conducted following a difficult year results in a lower limit for the following one, on the terms in the agreement.
What happens:Less capacity in the season after the one that was already hard, which is the sequence that compounds difficulty.
Each is visible before it happens. The peak from previous seasons sizes the limit, the floor recorded annually shows the second, and the third is what makes arranging a facility at the strongest point of the year worth the planning.
The cost of the season
What carrying the drawdown costs.
A seasonal facility charges on what is drawn, so this shows the interest cost of an average drawn balance across the year rather than a repayment. Indicative only, and not a quote or offer of credit.
Indicative interest cost
Weekly
$242/week
$1,050 /month $12,600 a year while drawn
$300,000
$5,000 $500,000
$140,000
Nothing drawn Fully drawn
9.00% 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 $300,000 scenario
$140,000 drawn at 9.00% . 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 seasonal patterns.
- Ministry for Primary Industries
The agency publishing production and sector data underlying the seasonal shapes described here.
- Stats NZ
Context for New Zealand agricultural production and seasonality.
- Personal Property Securities Register
Backs the description of security over livestock and produce alongside a seasonal facility.
- Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.
FAQ
Seasonal finance in New Zealand, questions answered
What is seasonal farm finance?
A revolving facility drawn as production costs are incurred and repaid when the season’s income arrives. It is the working capital of almost every New Zealand farm and interest runs on what is drawn rather than on the limit.
How should the limit be sized?
On the deepest point of the drawdown in the worst of the last three seasons, taken from the statements, plus a margin. A limit sized on an average season is short in a poor one, which is when an increase is hardest to obtain.
When is the facility deepest?
Ordinarily immediately before the main income arrives rather than in the middle of the spending. That is the point the limit has to accommodate, and it is later in the season than most people assume.
What does it cost?
Interest on the drawn balance for the months it is outstanding, plus a line fee on the limit whether or not it is used. The cost therefore depends on how deep the drawdown goes and how long it stays there.
Should the facility clear each season?
Ideally yes. A facility that returns to zero when the income arrives is doing its job. One that stops short leaves a floor, and a floor that rises across seasons is core debt inside a working facility.
What should be used before the facility?
Merchant and stock firm credit within terms, because it ordinarily costs nothing and covers many of the same inputs. Drawing on the facility while supplier terms are unused is paying interest to hold money that was free.
What happens if a payout is lower than expected?
The facility carries the shortfall into the next season, which is what it is for and also how a floor forms. One poor season is an event; a second raises the question of whether the cost base matches the system.
Can the limit be reduced?
On the terms in the agreement, and it is most likely after a poor season, which is when the facility matters most. Reviewing the terms before relying on the limit is worth the time it takes.
What security is taken?
Ordinarily a general security agreement over the business, and frequently security over livestock and produce as well. Where a land mortgage already exists, the seasonal facility usually sits with the same lender for that reason.
What is core debt in a seasonal facility?
The portion that never comes down. It is permanent borrowing carried at a working capital rate, and the ordinary remedy is to term it out and leave the seasonal limit free for the season.
Is it normal to run one?
Close to universal. Farming spends before it earns, and the gap is measured in months. Running a seasonal facility is an ordinary operating arrangement rather than a sign of difficulty.
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
Supplier advance finance
Advancing against a processor payment specifically.
Read onFarm term loan
Where a hardened seasonal balance ordinarily belongs.
Read onSeasonal cash flow by sector
Where the money lands, sector by sector.
Read onBy sector
How each production calendar shapes the drawdown.
Read onAll eight kinds of finance
Every rural facility compared in the same shape.
Read on