Karoo Game Farming - Chapter 3 - Finance
PETER AND LYNN DECIDE TO BORROW MONEY FROM THE LAND BANK.
“Lynn, lets have a cup of tea. The next thing I want to run through with you is how we should finance our sable purchase, but I’m thirsty and I need a break.” Peter and Lynn have been working on the budget for their farming on Alwynhoek. It is clear to them that, if they are to succeed, all aspects of their farming should be well managed, not just their new game venture.
“I want to try and achieve a 110% lambing with our sheep” said Peter “Dad only once got that right.” Peter is referring to his father Ken, recently deceased, who had left them the farm. “If we make sure the nutrition is right, there is no reason why we can’t achieve that more often.”
“He would be proud of you” said Lynn.
A few minutes later with tea in hand, the couple began to talk about how much capital they needed for the purchase of sable. While they were living in P.E. they had been saving to buy their own house, R110 000. This money they could use. Also they could sell the sheep stud (“it’s been a drain on this farm for years” said Peter). One of Ken’s fellow merino stud men, Ted Shipton, had offered them R220 000 for the whole 100 ewe stud as it stood. But they needed more than that. For how much finance they need see here.
How could they raise the money? The commercial banks were all treating them as novices and wanted prime plus 3%, but the Land Bank said, in view of their good relationship with his father Ken, that they would probably be able to finance Peter at prime plus 1%. (The remaining R150 000 owing on the farm was with the Land Bank).
“But will they make the finance available quickly enough?” asked Lynn. “They don’t have a good reputation, you know?”
“Well, I have had a good chat to their Vuyo Jeyi, he seems quite a bright spark. He says that the money we are looking for, in addition to what we already owe, is well within what the bank is authorised to lend to borrowers with our asset base, so there is little doubt that the loan would be granted. He assures me that if we submit our application by the end of this week, he will have an answer within 30 days, and payment in another 30.”
“Okay that’s settled then” said Lynn” We borrow from the Land Bank. Do you need me to help you to fill in their forms? I understand their applications are very detailed.”
“No, I think I can cope – better for continuity if one person does it.”
“Don’t forget though” said Lynn, thinking ahead “ In the last years your dad didn’t bother to bale the lucern, he used to graze it. If we are going to feed a herd of sable, we would do well to produce as much as we can of the hay, rather than buying it in. And your dad’s old Massey 165 is a bit finished, at least for powering a baler. We should allow something for its overhaul .”
“Can’t we do that on overdra…?“ Peter began to say, then he interrupted himself “Yes, you are right, better to make that cost part of the Land Bank loan. The commercial bank have seen fit to grant us a moderate facility, but they are nailing us on the interest rate. Better to keep the overdraft as small as possible. “
For the remainder of that working day the couple continued to work on the budget. They took a break for an early supper with their children, but after bed-time stories and tucking them in, they once again knuckled down and did not stop until they had put together a budget which they felt they could achieve. As they were turning in Peter said
“ Tomorrow I’ll phone uncle Ted and say to him that we accept his offer for the stud. I’d better remind him that some of those ewes are quite close to lambing, and that he should come and fetch them soon.
“And then I had better make a start on that Land Bank application.” With these thoughts swirling through his head, Peter drifted off into a dreamless sleep.
Join Peter and Lynn in the next chapter as they take delivery of their sable.