Farm loan in arrears: what to do before it gets worse

What should you do when a farm loan falls into arrears?

Start by taking a breath. Arrears are stressful, but most farm lending problems are workable if they are tackled early. The order that tends to help most is: gather your paperwork, speak to your lender, get free independent support, and explore refinancing or restructuring in parallel so you are not relying on one outcome.

Farm loans fall behind for reasons that have little to do with how well the place is run: drought, flood, fire, a commodity price slump, a failed contract, a death or illness in the family. A lender sees a missed repayment. You know the story behind it. Part of what we do is turn that story into something a credit team can act on.

What are the early warning signs?

• Repayments met only by drawing on an overdraft or redraw
• Suppliers, agronomists or contractors waiting longer for payment
• Lender letters mentioning review, default or demand
• An ATO bill that cannot be paid on time
• A fixed-rate or interest-only period about to end
• Machinery or livestock finance in arrears alongside the main loan

If you are seeing two or three of these, it is worth acting before a formal notice arrives.

What are your rights under state farm debt mediation laws?

Several states give farmers a structured path before a lender can enforce a farm mortgage. According to the Australian Government’s Department of Agriculture, New South Wales, Victoria, Queensland and South Australia have legislated schemes, and Western Australia has a voluntary one. The 2019 Royal Commission recommended a national scheme, but rules still depend on where the farm is. Tasmania passed a Farm Debt Mediation Act in 2024.

State	Scheme	Run by	Worth knowing
NSW	Farm Debt Mediation Act 1994	Rural Assistance Authority	Creditor must invite mediation in writing; farmer has 20 business days to respond
Victoria	Farm Debt Mediation Act 2011	Victorian Small Business Commission	Creditors must offer mediation first; costs of attending are subsidised
Queensland	Farm Business Debt Mediation Act 2017	QRIDA	Farmer can request mediation even if not in default; 20 business days to respond to an invitation
South Australia	Farm Debt Mediation Act 2018	State administered	Legislated scheme
Western Australia	Farm Debt Mediation Scheme	RBDC and SBDC	Voluntary; both sides agree to take part
Tasmania	Farm Debt Mediation Act 2024	Department of State Growth	Either party can request; a certificate process applies

In NSW, the mediator does not give legal advice or make decisions, and any agreement carries a cooling-off period. If no agreement is reached, the lender can apply for an exemption certificate. Queensland works similarly. Always read the notice you receive and contact the agency or a solicitor for your own situation. A mediation is a negotiation: the more prepared you are, with a budget, options and a support person, the better it usually goes.

What free help can you get?

The Australian Government’s Rural Financial Counselling Service provides free, independent and confidential help to farmers, fishers and foresters in hardship or at risk of it. Counsellors can build a budget and cash flow, help prepare an action plan and negotiate with lenders. They cannot give legal or financial product advice, but they can refer you on. The national line is 1300 771 741.

Eligible farm households may also qualify for Farm Household Allowance through Services Australia, which includes income support and access to a case officer. It will not fix a loan, but it can ease the pressure while a plan comes together.

What finance options can stop the slide?

Depending on the facts, Ownright can look at:

• A farm debt restructure that resets terms and repayments
• A farm debt refinance to move to a lender with a better fit
• A farm second mortgage to clear urgent items without disturbing the first lender
• Farm bridging finance when a sale, harvest or settlement is coming but cash is needed now
• A short private facility to buy time and clean up the file

If a sale of the property or a mortgagee sale is looming, our stopping a mortgagee sale page covers that scenario in detail.

Arrears make some lenders step back, and private lenders may price in the added risk, so terms can differ from a clean-file loan. We explain trade-offs before you commit. Pricing is set on your circumstances, never a standard rate.

How does Ownright help farmers in arrears?

Ownright was built around solutions. Trevor Scott has more than 40 years in finance, and the team is used to tight timelines and complicated security. For farms we know which lenders will look past the arrears to the land and the enterprise, and we know when it is better to negotiate than to refinance.

We work Australia-wide and can often engage quickly where time is short, though speed depends on the lender, the security and how fast documents arrive. We never promise an outcome we cannot deliver. We will tell you honestly if the better path is mediation, a counsellor or a conversation with your existing lender first. When you are ready, contact us here.

How should you prepare for a lender conversation or mediation?

Most farm families walk into these meetings with the facts in their heads and the paperwork in several places. A little structure changes how the day goes. Bring a one-page summary that covers the cause of the shortfall, what has already been done, and what you are proposing. Add a simple twelve-month cash flow that shows realistic income dates, such as shearing, harvest, a sale draft or a milk cheque, against the commitments that fall due.

It is also worth bringing a support person. A rural financial counsellor, accountant or trusted adviser can take notes, keep the conversation on track and help you avoid agreeing to something under pressure. Ask for any offer in writing so you can think about it overnight.

What can a lender actually be asked for?

Lenders have more flexibility than many farmers expect. Depending on the lender and the file, requests that are sometimes considered include:

• A period of interest-only repayments while production recovers
• A longer loan term to lower each repayment
• Capitalising a small amount of arrears into the balance
• Repayments timed to match income, such as seasonal or quarterly instalments
• A temporary pause on principal while an asset sale settles

None of these is guaranteed, and a lender may attach conditions. Knowing the menu in advance lets you ask for what fits the farm instead of accepting the first proposal.

Which debts should be tackled first?

When several accounts are behind at once, the order matters. A rough guide that counsellors often use is to protect the debts secured against land first, then the ones that could stop the enterprise operating, such as fuel, feed and essential contractors, and then to negotiate with unsecured creditors. If there is an ATO balance, contact the ATO early about a payment arrangement and keep lodgements current, since a lender will ask about it. Our page on farm debt restructure explains how several debts can be brought into one workable structure.

How do seasons and timing change the plan?

Arrears on a farm are rarely a flat line. A cropping enterprise may be weeks from harvest income. A beef producer may have a sale booked. A horticulture grower may be waiting on a contract payment. When income is close, the right move is often a short bridge or a negotiated pause, not a full restructure. When income is a long way off, or the cause is structural, a refinance or longer-term arrangement is more likely to fit. We ask about your calendar early because it separates those two situations quickly.

What if more than one family member is involved?

Farms are often held through partnerships, trusts, companies or family arrangements, and loans may carry guarantees from parents, siblings or in-laws. Arrears can put several people under pressure at once. Before any restructure, it helps to know who has signed what, which assets back which loan, and whether everyone is aware of the position. Succession plans can change the picture too, so read farm succession and finance if a handover is on the horizon.

An illustrative example

This is an illustrative scenario with no real client behind it. A dairy family falls three months behind after a milk price drop and a major equipment repair. Their lender sends a default notice. The family contacts the Rural Financial Counselling Service, which helps them build a recovery budget. Ownright reviews the title and cash flow, and a lender prepared to refinance with arrears considers the file. A new facility clears the arrears and sets repayments the farm can meet. The state mediation process stays available as a fallback.

Mistakes to avoid

• Ignoring lender letters or missing the response deadline on a mediation invitation
• Waiting until a demand or listing date is close
• Signing a quick fix, such as a short expensive loan, without a plan for repaying it
• Selling stock or machinery in a panic when a restructure could keep the farm productive
• Facing it alone. Counsellors, accountants and brokers all see this regularly.

Documents to have ready

• All lender notices, letters and emails
• Loan statements showing arrears and fees
• Latest financials, BAS and bank statements
• A rough list of income due in the next six months
• Rates notice and title details
• ATO account summary, if there is a tax debt

Please contact us as soon as you can. Start your enquiry and tell us the dates on your notices, and we will tell you what is realistic.