When debt stress changes the way we think
Debt isn't inherently a bad thing.
In agriculture, debt has enabled generations of farming businesses to buy land, expand, invest in infrastructure, improve productivity and take opportunities that otherwise would have been out of reach. Used well, debt can also be a powerful motivator. Repayments sharpen focus, create discipline around cashflow and make sure an investment is expected to perform.
I've seen businesses use debt exceptionally well.
But there is a difference between debt that creates productive pressure and debt stress that becomes all-consuming, and I learnt to see that difference the hard way.
Working alongside farming families through the 2007 drought was one of the hardest periods of my career, and it's one I still return to often. Many of those conversations have stayed with me over the years. I didn't have language for it at the time, I just knew something had shifted in how people were showing up to those conversations.
I've seen the same pattern since, with more than one client, in easier years and harder ones. Over time, I've learnt to recognise some of the signs that financial pressure may be affecting more than the numbers.
What financial pressure does to the way we think
Research examining financial stress suggests the experience isn't simply about the amount of debt someone carries. The capacity to meet financial obligations, arrears and the experience of financial strain also appear to matter. A separate review of the relationship between unsecured debt and mental health found a similar pattern, more severe debt generally associated with poorer health, particularly mental health, though the authors caution that causality is difficult to establish from this kind of evidence.
That makes sense in agriculture. Two businesses can carry the same level of debt and experience it completely differently. Debt attached to productive assets, supported by cashflow and with a clear strategy behind it, is very different to debt a business is struggling to service.
Debt can be motivating when it creates productive pressure. But when repayments can't comfortably be met, working capital is disappearing and options are narrowing, it can become crippling in very real financial terms.
It can also become crippling emotionally.
The broader neuroscience of stress helps us understand some of what can happen under sustained pressure. The prefrontal cortex, which plays an important role in planning, judgement and complex decision-making, is particularly vulnerable to stress. Yale neuroscientist Professor Amy Arnsten has described stress as being capable of shifting the brain "from reflective to reflexive control of behaviour."
When someone is worrying about the next repayment, whether the bank will keep supporting them, or whether an asset they never imagined selling might need to go, they are simultaneously being asked to do some of the most complex thinking of their working life.
Refinancing, restructuring, selling stock, changing an enterprise, reducing costs or having the hard conversation with family. Some of the biggest decisions in a farming business can arrive at exactly the time when clear, reflective thinking becomes harder.
The behaviours that can show up
This is often where financial pressure starts becoming visible beyond the balance sheet.
Irritability with a routine request for information, reluctance to pick up the phone, less transparency around numbers that used to be discussed openly and difficulty accepting that a decision isn't working as expected. Or a readiness to look for someone else to blame, whether that's a partner, a bank, an adviser or the season, before considering what's within their control.
People don't necessarily identify any of that as financial stress. They might describe themselves as busy, frustrated, sick of being asked questions or simply fed up with the people around them.
That doesn't mean every difficult interaction is caused by stress, or that someone under pressure can't make good decisions. It means the pressure itself can become part of the decision-making environment, whether anyone names it or not.
Accountability isn't the same as blame
Understanding what stress can do to people doesn't remove accountability.
There is plenty outside a farming business's control: rainfall, markets, interest rates and events nobody could reasonably have anticipated.
But there are also decisions within our control.
It is worth being able to look back, without turning the exercise into one of fault-finding, and ask:
What risks and assumptions sat behind the original decision?
What has changed since that decision was made?
What were the first signs that those original assumptions might no longer hold?
What were the numbers telling us as the situation changed?
What advice or other perspectives did we seek along the way, and what did we do with them?
Knowing what we know now, what would we do differently?
Those aren't questions about blame.
Blame looks for who is responsible for how I feel. Accountability looks at what I am responsible for doing next.
They are not the same question and confusing them can make an already difficult financial position harder to work through.
Facts and records matter here more than almost anywhere else. What was discussed? What was agreed? What do the numbers show? What advice was provided, and what decision was ultimately made?
Getting back to those facts moves a conversation away from assumption and towards something concrete. Not to prove anyone wrong, but to establish a shared understanding of where things stand.
Getting the problem out of your head
One of the most useful things I can do in these conversations is get the problem out of someone's head and onto paper.
Rather than trying to solve everything at once, we can start with some practical questions:
What does the business owe, and what is that debt costing?
What repayments are coming up, and when?
What do the next 12 months of cashflow tell us?
What assumptions are sitting behind the cashflow?
How does the position change if the season or prices don't meet those assumptions?
What options are genuinely available from here?
What would each of those options mean for the business?
What needs a decision now, and what simply feels urgent because everything feels urgent?
Then we can put numbers around those options.
That doesn't necessarily make the answer easier. Sometimes it confirms something nobody wanted to hear. But it gives everyone facts to work with rather than allowing fear to fill in the gaps.
It also separates two questions that often become tangled together: how did we get here, and what happens from here?
The first is about learning. The second is about what's still within our control.
Those of us on the other side of the table have a responsibility too. We need to be clear about what the numbers are saying, challenge assumptions when necessary and recognise that the person across from us may be carrying considerably more than the spreadsheet shows.
Sometimes that means slowing down. Sometimes it means documenting things rather than just discussing them. Sometimes it means going through something more than once.
Good advisory relationships matter more, not less, when things are hard. They need enough trust for someone to ask the difficult question, challenge the thinking and say something that may be difficult to hear.
Understanding the impact of stress also doesn't mean accepting unreasonable behaviour towards the people trying to help. Empathy and professional boundaries can exist at the same time.
The next decision still needs to be made
Debt can be one of the most useful tools a farming business has. It can fund opportunity, enable growth and provide a powerful motivation to perform.
Debt stress is something else entirely.
When the pressure becomes overwhelming, we're no longer talking only about a debt-to-assets ratio or a repayment schedule. We're talking about people trying to make hard decisions while carrying a weight nobody can see on a balance sheet.
Empathy doesn't remove accountability, and accountability doesn't require blame.
At some point, regardless of the season, the bank, the adviser or the decisions made five years ago, there is still another decision sitting there.
The question becomes less about who can I blame for where I am? and more about given where I am today, what am I responsible for doing next?
That's usually where the path forward starts.
This article is general in nature and does not constitute financial, legal or medical advice. I am not a mental health professional. If financial pressure is affecting you or someone in your business, the Rural Financial Counselling Service provides free, independent financial counselling to eligible primary producers and small rural businesses. The National Debt Helpline also provides free financial counselling. If you or someone you know needs crisis support, Lifeline is available on 13 11 14.
If you want help getting the numbers out of your head and onto paper, that's exactly the kind of work we do through AgCelerate™. You can find out more about AgCelerate™ or book an introductory meeting to talk through where your business is at.