Laming, speaking at a DairyNZ seminar, emphasized that bank credit assessment is a mix of “science and art,” incorporating both objective financial metrics and subjective interpretations. He highlighted a concerning gap where a farmer might be denied a loan for subjective reasons, mistakenly believing their proposal is flawed when, in reality, they simply lack the nuanced understanding of banking “lingo” and the intricate behind-the-scenes processes. This disparity can lead to farmers paying significantly higher interest rates than their peers, even with similar risk profiles.

The true cost of this disconnect is staggering. Laming cited instances where farmers with similar debt and risk profiles pay wildly different interest rates, with some paying double that of others – equating to hundreds of thousands of dollars in extra costs over the life of a loan. This “high price for inertia” is not about credit quality but about the lack of competitive tension and active management of the banking relationship. Farmers who don’t actively shop their deal or seek specialist advice often land at the top of the bank’s interest rate range.

Beyond direct financial impact, Laming noted a “less visible – but arguably more damaging – cost” to farmer confidence. Those paying more or lacking a clear financial picture often delay crucial investment decisions, such as upgrading infrastructure or acquiring land. Conversely, farmers who understand their funding position and have sharp pricing are more confident to act, driving productivity and innovation. This confidence gap ripples through the entire dairy sector, impacting overall growth and resilience.