What banks are really looking for in an application

As far as great Australian industries go, our winemaking business is world-class.

If you’ve ever wanted your own slice of the vine, there are vineyard loans available to make those dreams a reality.

How much can I borrow?

  • Borrow up to 50-70% of the property value depending on the mix of vines compared to the rest of the rural property.
  • Borrow up to 100% of the property value by using a guarantor.
  • Loans over $5,000,000 are assessed on a case by case basis.
  • The bank will generally require a business plan and profit forecasting for the vineyard.
  • Low doc options are not available.
  • Interest rate discounts vary depending on the lender and your financial situation.
  • Agribusiness line of credit is available.

Do you qualify for a vineyard loan?

Call us on 1300 889 743 or complete our free assessment form for speak with one of our specialist mortgage brokers today.

How can a broker help?

Rural properties, commercial farms and agribusiness finance require particular credit expertise since every application is assessed on a case by case basis.

Vineyards and wineries are particularly specialised so getting approved for a loan comes down to a number of factors, not least of which is the location of the property.

Getting approved for a vineyard loan in New South Wales is a lot different to buying a vineyard in South Australia, for instance.

That’s because the very few lenders that do specialise in agriculture refer these applications to local business managers who are in the area you want to purchase in.

Banks are very particular with the farmland they will accept so they want to see the property first-hand, usually with the valuer.

We have strong relationships with major banks and lenders which means we have a good chance of finding a relationship manager that will consider your application.

In addition, we can maximise your borrowing power and negotiate a sharp commercial interest rate by highlighting your strengths as a borrower.


What do I provide as security?

Firstly, you must provide a residential property as security.

Secondly, banks will take a General Security Agreement (GSA) over the vineyard and any assets located on the property.

These assets include standalone structures such as the residential property you will live in and any commercial real estate such as a cafe or a bed and breakfast.

It also includes any machinery and equipment included in the sale such as grape harvesters, vineyard mowers, grape sprayers, fermenters and grape presses.

The bank will run a valuation on these assets the same way they would run a valuation on a residential property as security.


What about water licences?

Yes, our best lender will lend against the value of water licences as well.

Vineyards generally come with 2-3 water licences.

The value of water licences changes on a regular basis and varies by region and state.

There is even a water trading market – Google it!

It also depends on what kind of licences are currently listed on the property such as a water allocation licence, seasonal water assignment licence or a relocatable water licence.


What do most banks think of wineries?

Although there are a few lenders that offer agricultural loans, only one of our lenders will consider a winery purchase.

The reason is that values on vineyards can vary significantly, particularly when there is an oversupply of wine on the market.

The other issue they have is with the agricultural mix of the property, specifically, if the majority of the land is dedicated to vines.

Most banks would prefer to lend against a mixed farming property.

For example, around 25% of the land contains vines but the remaining 75% can be used to raise livestock or to grow other crops.

This opens up the market to a wider mix of potential buyers, reducing the bank’s risk if they had to sell your property due to mortgage default.

Our best lender can lend against this “alternate use value” which means you may be able to borrow up to 70% in some cases.


How are vineyards valued?

Location

Unlike other commercial properties, banks don’t generally discriminate on location.

Many wineries are found in rural locations in regions full of other grape growers.

These regions include the Hunter Valley, Orange, Goulburn Valley, Barossa Valley and Tamar Valley.

Although vineyards that are close by are competitors, they aren’t technically direct competitors.

It’s the particular climate and environment that these regions offer that supports winemaking so it makes sense that there can sometimes be thousands in the same location.

In addition, these regions are weekend getaway locations for couples and families so they attract significant tourism.

Of course, the bank would want to undertake some due diligence if you’re planning to run your own winery on vacant farmland.

You’d need to provide evidence in your business plan that the local climate will support your business.

Buildings, machinery and other assets

Most vineyards will include a residential property for the owners to live in and likely a shed or two for storage. These properties also hold a value that banks will lend against.

Other vineyards will also have a distillery on location as well as a cellar door for customers to buy or try wine, a cafe, a small restaurant, a function centre, a barrel hall or even a bed and breakfast.

Size

All land sizes will be considered.

It largely depends on the nature of the property and what the land is currently being used for.

Bank appetite for agricultural businesses and farmland can change frequently and will vary depending on the strength of the application.

Strong tenants in place

Banks will want to see the last 2-3 years business financials of the current owners to work out whether they’ve run a successful vineyard.

They’ll want to know how long the vendors have been operating the property and, in particular, why they’re selling.


Proving your income

Approval for vineyard loans requires you to be in a strong financial position.

This means having little to no debt, a good asset position and a strong income.

You can show this with your last 2-3 years personal financials and business financials if you’re currently self-employed.

This income evidence will include:

  • Your last two payslips.
  • Your most recent group certificate.
  • Your last two ATO tax portals if you’re self-employed.
  • Business bank statements for the past 2-3 years.

Do you have a business plan?

Banks want to see that you’ve done your due diligence on the property you’re looking to purchase.

This will require you to write a business plan with the help of a qualified accountant. In it, you should provide details on the following:

  • A cash flow forecast using market research and trading financials for the current owners.
  • Competitor research.
  • Marketing strategy.
  • Detail your industry experience, what staff will be retained from the purchase, and whether you will hiring viticulture experts or an oenologist to help manage the vineyard.
  • There should also be an overall SWOT analysis completed on the property and the winemaking business currently operating.

Are you a foreign investor?

Overseas investors love Australian farmland, particularly buyers from the UK, the US and China.

In fact, China recently edged out other nations as the fastest growing market for the Australian winemaking industry. They sure love a good drop!

Banks have raised concerns about the prevalence of fraudulent income verification from certain countries, however, banks will still consider your application if you’re a non-resident.

Do I need government approval?

Unless you’re a substantial investor, then you likely won’t need approval from the Foreign Investment Review Board (FIRB).

Check out the non-resident commercial loan and farm FIRB approval pages for more information.


Get legal and financial advice

When buying a commercial property like a farm or a winery, it’s important to seek out professional advice from a qualified accountant and a solicitor.

An accountant can help you assess the financials of the vendors and the business they’re running.

A solicitor can help to ensure the Contract of Sale for the property and the Heads of Agreement for the business are in your best interests.

In particular, it’s important to work out what is actually included in the sale of the winery.

This includes any plant and machinery, equipment and vehicles.

Also, if there is currently a cafe or another business running on the property, will the leaseholders and staff be retained.

Will you have to run this side of the business yourself?

It’s important to consider these extra bits and pieces because your costs of operating can quickly blow out.

This is something you should determine when undertaking your due diligence.


Winemaking industry snapshot

It’s still growing but the glory days of the Australian winemaking industry came to an abrupt halt around 5-10 years ago.

Corporate takeovers of family run vineyards and thousands of hobby farm-sized entrants combined to create a glut of wine on the local and export markets.

This oversupply peaked over the two years over 2013/14.

Other factors that affected growth in the wine production and grape growing industries included the strong Australian dollar and competition in export markets.

However, the sector is likely to bounce back over the 3 years to 2017 thanks to:

  • Depreciation in the Australian dollar.
  • Free trade agreements with South Korea, Japan and China.
  • Poor harvests in Chile and Argentina.

Ask us about vineyard loans!

You could soon be on your way to making your own drop in a stunning rural landscape.

Call us on 1300 889 743 or complete our free assessment form to find out if you qualify for a vineyard loan.

  • Koby

    Is a GSA absolutely needed for this or is there some way we can avoid the hassle of it?

  • Hey Koby,

    Unfortunately, almost all lenders will require a GSA for this because vineyards and wineries are particularly specialised. GSAs can generally be avoided if you’re in a strong financial position, you have experience plus a strong business plan and you’re buying a standard commercial property such as an office unit or a warehouse.

  • Phil Davison

    If there is a residentail property on the vineyard, does this count towards the security or is a separate residential property required? My wife and I each have a property which we were planning on selling in order to invest in a winery (once she has finished her viticulture and oenology degree). Thanks

  • Hi Phil,
    Yes the vineyard would be valued as it is including any houses on the property.
    It would be assessed as a vineyard if the total revenue is >$20,000 p.a.
    It would be assessed as a hobby farm (i.e. normal home) if the income generated was limited and you still worked in other jobs.
    Most importantly, if you’re making Cab Sav or Shiraz then please send us a few bottles.

  • Phil Davison

    Thanks for getting back to me. So just to confirm, if we were to sell our privately owned properties and invest in a commercial vineyard (approx. $130k revenue per year) which has property on site that we live in, would we be able to qualify for a Residentially secured commercial loan (assuming all other conditions were met of course)

  • Hi Phil,
    This would be a commercial loan. $130k in revenue is unlikely to be seen as a hobby farm. We’d need to know the full details of the property to be sure. Indicatively you can borrow 50% to 70% of the value of the vineyard.

  • Phil Davison

    Thanks, I understand it would be a commercial loan. Referring to your page on Commercial Loan Interest Rates, would it be a “residentially secured commercial loan” and hence be able to negotiate a 3.99% rate (fixed for 5 years) due to the fact that we would be living in property on site. Or would it still be a “commercially secured loan” and thereby have a rate of 4.8% (Fixed for 5 years)?

  • Hi Phil,
    It would be a commercially secured loan. The rates quoted are for standard commercial properties (office, factory unit, retail etc) however for specialised properties (petrol station, child care, vineyard, farm, pub etc) the rates can vary. I expect you’d get a good rate however it may not be 4.8%. Indicative range would be 4.5% to 6.5%.