Quick answer
Farm development loans fund improvements that lift a property's productivity and value, such as machinery sheds, grain storage, dams, bores, tanks, fencing, yards and pasture work. Lenders look at the project's return, your existing debt and the security. Ownright Custom Finance arranges farm development finance Australia-wide.
Key points
- Infrastructure spending often lifts carrying capacity, efficiency and resale value
- Lenders want to see how the project pays for itself or protects income
- Staged drawdowns can match payments to progress on the works
- Some improvements carry special tax treatment, so talk to your accountant
- Options include adding to an existing facility or arranging a separate loan
- Suits
- Owners improving sheds, water, fencing, yards, storage or pasture
- Funding style
- Top-up to an existing loan, standalone development facility or staged drawdown
- Security
- The farm, which usually benefits from the improvement
- Australia-wide
- Yes
What are farm development loans?
Farm development finance pays for the things that make a property work: sheds to protect machinery and hay, silos and bunkers for grain, dams and bores to secure water, fencing to manage stock and pasture, yards that make handling safer and quicker, and pasture work that lifts carrying capacity. These are not the headline items in a farm sale, but they often decide whether a property performs.
A development loan can be a top-up on your existing facility, a standalone loan, or a staged facility that releases money as works progress. Ownright Custom Finance arranges all three, Australia-wide, and tailors the structure to the project rather than the other way round.
Why do lenders care about development spending?
Because it changes the security. A good shed, reliable water and sound fencing can lift a farm’s productivity and make it easier to sell. A poorly planned project can leave the owner with more debt and no better income. Lenders therefore look for:
- Purpose. A clear reason for the project and the problem it solves.
- Return. How the improvement affects income or costs, such as higher stocking rates, lower labour, reduced feed costs or protected production.
- Cost and quotes. Realistic budgets from reputable suppliers.
- Approvals. Any permits, water licences or council consents.
- Existing debt. Whether the farm can carry extra borrowing.
- Timing. Seasonal windows, such as building before harvest or fencing before calving.
Common development projects and what lenders ask
| Project | Typical benefit | What lenders may ask for |
|---|---|---|
| Machinery or hay shed | Protects assets, reduces losses | Quotes, approvals, location plan |
| Grain storage | Marketing flexibility, harvest efficiency | Capacity, cost, grain marketing plan |
| Dams, bores, tanks | Water security for stock or crops | Licences, yields, site assessments |
| Fencing and laneways | Better grazing management, stock control | Scope, cost per metre, quotes |
| Stockyards and handling | Safety, labour savings, animal welfare | Layout, supplier details, cost |
| Pasture renovation | Higher carrying capacity | Seed and fertiliser plan, expected improvement |
| Staff accommodation | Labour attraction and retention | Planning approvals, cost, use |
Who do development loans suit?
- Farmers who have bought a property that needs work
- Owners adding water security before a dry season
- Graziers upgrading fencing and yards as part of a stocking change
- Cropping businesses building grain storage to market more flexibly
- Producers meeting new standards from processors or buyers
- Families preparing a farm for sale or succession
See water and irrigation finance for bigger water projects and farm equipment finance for machinery. Industry-specific pages such as poultry farm loans and sheep and wool loans cover sector-specific infrastructure.
How does Ownright approach farm development finance?
We start with the project and the property. What is being built, who is doing the work and what is the expected benefit? Then we look at your current position, since the cheapest way to fund development might be a top-up, a new loan or a refinance that rolls the project into a better overall structure.
Staged drawdowns are often useful. They let you pay contractors as stages are complete, rather than borrowing the lot on day one. Lenders typically need evidence of progress, and we help coordinate it. If your existing lender will not fund the work, we can look at non-bank and private options. Trevor Scott’s four decades in finance are a good guide to which lenders are comfortable funding improvements on a rural title.
If you have quotes in hand or a project in mind, send us the details and we will outline the options.
Common development situations
Illustrative example: water before the dry. A grazier wants to sink a bore and add tanks and troughs before summer. The cost is modest compared with the property value, but the bank’s current limit is fully drawn. A top-up from another lender, secured over the farm, funds the works in time.
Illustrative example: fencing for a change in stock. A farm moving from set stocking to rotational grazing needs extensive new fencing and laneways. The lender wants to see the productivity benefit. A budget showing the planned carrying capacity helps, and a staged drawdown aligns with the contractor’s schedule.
Illustrative example: shed for newly bought machinery. A cropping family buys a header and needs somewhere to store it. A shed loan, kept separate from machinery finance, protects the asset and keeps the facility structure simple.
Mistakes to avoid
- Starting work before approvals and funding are confirmed.
- Relying on a single quote with no allowance for overruns.
- Borrowing for projects without a clear payback or benefit.
- Assuming a top-up from the current lender is the only option.
- Neglecting tax advice on special deductions for primary producers.
- Choosing a loan term that outlasts the useful life of the asset.
What to have ready
- Quotes and plans for each part of the project
- Planning approvals, licences or water permits
- Financial statements and tax returns
- Existing loan statements and security details
- A short budget showing the expected benefit
- Photos or site plans where useful
The ATO publishes information for primary producers, and state departments such as NSW DPI and Agriculture Victoria have practical guidance on water, fencing and pasture.
A well-planned development can pay for itself many times over. Start a farm development enquiry and we will find a structure that suits the project. Approval cannot be guaranteed, but a clear application and the right lender make a big difference.
How do lenders view improvements they cannot sell separately?
A fence, a bore or a pasture improvement is fixed to the land. It adds value only if the property sells with it, and valuers do not always credit the full cost. That is why lenders look at the benefit to income as well as the capital cost. A project that clearly improves production or lowers costs is easier to support than one that is simply nice to have.
How should you sequence a big development program?
Many properties need several jobs at once. A sensible order often starts with water, then fencing and handling, then sheds and storage, since water and fencing influence how the land is used. Staging a program over several seasons can spread cost and reduce risk. We can structure a facility that supports a multi-year plan, with each stage released as it is completed.
Can development finance be combined with equipment or purchase?
Yes. Buying a run-down farm and fixing it up is common, and combining the purchase and development funding in one structure can be simpler than juggling two. For equipment, separate finance may suit better because machinery has a shorter useful life. We look at the combination of facilities to make sure terms match the assets. See farm purchase loans for acquisitions.
What tax treatment applies to farm improvements?
Primary producers get some unusually helpful treatment for certain improvements. The Australian Taxation Office allows an immediate deduction for the cost of fencing used primarily and principally in a primary production business, for fodder storage assets such as silos, hay sheds and grain storage sheds, and for water facilities such as dams, tanks, bores, pumps and irrigation channels, subject to the conditions on its website. Lessees can claim these too.
That treatment can change how worthwhile a project is, and when it is best done. It does not replace a finance plan, since the deduction arrives at tax time while the contractor needs paying now. Your accountant can confirm what applies to your situation, and we structure the borrowing so it lines up with the timing.
How do staged drawdowns and inspections work?
A development facility that releases funds in stages usually follows a pattern:
- The lender approves a total limit against the project budget.
- You pay a deposit or first stage to the contractor.
- As each stage is completed, you provide an invoice and sometimes photos or an inspection report.
- The lender releases the next part of the funds.
- A final release follows completion and any sign-off.
Lenders do this to protect the security, and it protects you as well, because it keeps payments tied to finished work. Some lenders arrange inspections by a valuer or a quantity surveyor, and some accept photographs. Knowing the expectation before you sign the contractor means the drawdown schedule can match the work schedule.
What if you lease the land?
Improvements on leased country are riskier for a lender, since a fence or bore on someone else’s land does not form part of the borrower’s security. Lenders will look closely at the lease: its term, any renewal rights and the owner’s consent to the works. A long lease with a clear right to improve is far better than a short, informal arrangement. Where the improvement is substantial, other security such as the borrower’s freehold, or a guarantee from the landowner, may be put forward.
Which jobs deliver the quickest benefit?
There is no universal order, but lenders tend to respond best to projects with a visible, measurable return:
- Water security ahead of a dry season, where it protects production
- Handling facilities that cut labour and injury risk
- Fencing that supports rotational grazing or protects crops
- Storage that lets you market grain or hold fodder rather than buy it at peak prices
- Pasture or soil work that lifts stocking rate over a few seasons
Projects that mainly improve comfort or appearance can still be funded, but lenders will want to see that the farm can carry them. If you are weighing a number of ideas at once, it often helps to rank them by payback and by how much each protects the existing business.
How does a development loan fit with a farm purchase or sale?
Buyers often find that a farm needs work immediately, while sellers sometimes want improvements done before listing. Both situations call for planning. A buyer may roll the works into the purchase facility, as farm purchase loans can explain. A seller may borrow short term to improve presentation and then repay from the sale. Either way, lenders want to understand how the works change the property’s value and what happens if the sale or the project takes longer than expected. Talk to us before you commit and we will lay out the choices.
How it works, step by step
- 1
Step 1
We talk through the project: what is being built or improved, the cost, the timeline and the expected benefit.
- 2
Step 2
We gather quotes, plans, approvals and financials, and show how the project fits the farm's cash flow.
- 3
Step 3
We choose the structure, whether a top-up, new facility or staged drawdown, and approach suitable lenders.
- 4
Step 4
We manage approval and drawdown arrangements so payments to contractors line up with progress.
Frequently asked questions
What can a farm development loan be used for?
Typical uses include machinery and hay sheds, grain storage, dams and bores, water tanks and troughs, fencing, stockyards, shearing sheds, laneways, pasture renovation and irrigation. Some lenders also fund dwellings or workers' accommodation on the farm. The key is that the improvement relates to the property.
Do lenders want to see a return on the project?
Usually, yes. A development that lifts carrying capacity, reduces costs or protects against drought is easier to support than one with no clear benefit. A simple budget showing the improvement and how it affects income helps.
Can I draw funds in stages?
Often. Staged or progress drawdowns release money as works are completed, which matches how contractors are paid and reduces interest on unused funds. The details depend on the lender and the scale of the project.
Should I top up my current loan or arrange a new one?
It depends on your existing lender, your equity and the project cost. A top-up can be simple but depends on your current lender's appetite. A new facility, or a refinance with a new lender, may offer better structure. We compare options.
Do I need council or planning approval?
Depending on the project and location, shed construction, dams, clearing and some water works may require approvals from councils or water authorities. Lenders often ask for approvals before funding. Check requirements with your council or state agency.
Are there tax benefits for farm infrastructure?
The ATO has special deduction rules for primary producers on items such as water facilities, fencing and fodder storage. How they apply to you depends on your circumstances, so confirm with your accountant.
What if the lender won't fund development on my property?
Some lenders limit spending on improvements, particularly when debt is already high. Other lenders, including non-bank and private options, may take a different view. Ownright can look beyond the first answer.