As I mentioned in my previous article, the nature of the hay market right now creates some tension between how suppliers would like to make sales and how buyers would like to source hay. Putting aside the ever-increasing difficulty of finding the right product, this tension often sees suppliers holding back on much-needed sales whilst buyers spend much-needed time shopping around trying to find supply.
For buyers, as the winter extends and supply tightens, it will become increasingly harder to find suppliers who will offer terms. If you need hay you’re more and more likely to need to pay for it upfront. So if you haven’t already looked at your funding options to get you through to Christmas, it would be wise to make a start!
There is little doubt that the cheapest form of funding generally comes from an increase in your overdraft. However as many are finding, a quick overdraft extension is not so quick.
I am constantly seeing customers getting stuck in the ‘bank system’ waiting for the ok on the overdraft and it’s unlikely that the banks are going to speed this process up anytime soon, especially if it’s only a small extension that is required.
Often the worst part of the process is that it isn’t a quick no. My recent research would suggest it’s rare for an extension to be granted inside 6 weeks. Several months is more likely.
Whilst it feels that small increases should be quicker, it’s often the other way around. I constantly hear of customers getting very frustrated on extensions of less than $1M. And I am afraid to say that smaller requests in today’s market have a habit of slipping to the back of the pile, especially if a full review of your situation is required.
If the spring doesn’t quite pan out as you would hope, the last thing you want to do is wait until then to find out if you will need funding. Off the back of a tight autumn, knowing you have some gas in the tank if you need it is worth knowing as soon as possible.
If finding it at the bank is proving difficult, understanding your other options before you need them makes sense as there is nothing worse than having to hunt quickly for funding at the same time as searching for more and more elusive supply. As the season progresses, those with cash on hand will be able to buy on the spot while those without will tend to miss out.
So, if you are a consumer of hay and you’re unsure if you have enough funds to get through spring take the time to have a good think about where your funding will come from and speak to those that can help, such as your accountant and broker. The longer the season goes, the more reluctant suppliers will be to provide credit.
Next week I’ll share some thoughts on how suppliers of hay can use cashflow to ensure they have the option of maximising the sales they can make now whilst demand is strong. In the meantime, I would love to hear from more people about how they are managing this challenging market place. Send me an email at kelseym@delaypay.com.au or request a callback HERE.