These days most farmers lease their vehicles, tractors and machinery through a bank or finance company.

This is a good business strategy, as it allows capital to be used in other areas of the business.

Over many years efforts have been made to persuade lenders to accept cattle as collateral and, while some progress has been made in this area, it is still not easy to borrow money against cows.

CowBank is a small company specialising in herd leasing. It started operating in 1999 and offers the farmers the opportunity to lease herds of more than 100 cows.

CowBank's staff of six has a very interesting blend of skills, from dairy farming to investment banking.

The one thing they all have in common is a strong belief in the positive outlook of the Australian dairy industry, and looking forward to being a part of this long term future.

A discussion with Hank Bruger, a consultant with CowBank, leads to the conclusion that the company is confident it has a place in the future of the industry.

The CowBank team would like to be known as the "livestock-leasing people", with client who seek to be profitable by becoming sustainable low-cost milk producers.

CowBank is into leasing, so there is no mortgage and the lease can represent up to 100 percent of the value of the herd.

Eligibility is assessed on cash flow and the farmer's ability to service the debt, with the lease structured to allow payments to best fit the business.

The lease payments are tax deductible. Currently, CowBank has more than 100 active leases, representing 22,000 dairy cows, 2000 beef cows and 4400 beef bulls - worth some $22 million all up.

Experience shows that one of the difficulties of buying a first farm is having sufficient capital to not only purchase, but to have that little extra for the unexpected.

Being able to lease the herd offers great assisstance to those who are purchasing property for the first time, or a dairy framer buying a neighbouring farm.

For example, when the 2003 Sharefarmers Of The Year, Lindy and kelvin Bruce, from Katunga, were invited to hand over the mantle to this year's winners,  Tania and Mark Neville from Mepunga East (in the Western District), Kelvin said he though winning the sharefarmer award last year had - in the eyes of possible lenders - advanced the family objective of ownership by five years.

Combine this success with access to an operation such as CowBank and suddenly new options appear.

CowBank is seeking to do business with dairy farmers who "can grow grass", "love their cows", "are good people" and "have the ability to be sustainable low-cost milk producers" with a "rule of thumb: criteria of farmers or sharefarmers with herd of 200 or better.

The core lease is for five years, with monthly payments direct from the manufacturer. The lessee has to replace 20 per cent of the cows each year of the lease and an annual audit of herd numbers and cow condition with be carried out by CowBank.

A cow is worth $1000 at the beginning of the lease and there's a $300 residual.

Indemnity costs $20 a cow a month.

The payments are fixed for the term.

I believe the concept is a good one and farmers with livestock should inquire to see if it is suitable for them.

However, as with all leasing deals, you would be wise to check the fine print of any agreement and discuss it in detail with your financial adviser.