Concessional Loans for Agribusiness affected by drought
The Australian Government has announced a Drought Assistance package with the aim of strengthening primary production sectors and supporting rural communities.
The reported $500 million funding pool is centered around 3 themes:
- Immediate support for those in drought
- Support for the wider communities affected by drought
- Long-term resilience and preparedness.
A service that falls within the immediate support theme is the existing Regional Investment Corporation concessional loans for farmers and farm business owners in financial need. This program has been expanded in this Drought Assistance package .
Updated details of the Regional Investment Corporation (RIC) farmer loans are outlined below.
The payback structure of these loans are as follows:
- Maximum loan amount of $2 million;
- First two years no interest and no repayment;
- Three years of interest only repayments on an indicative 3.11% p.a. variable rate; and then
- The remaining five years to pay back the loan, with a balloon repayment at the end of 10 years in some cases.
To be eligible for concessional loan funding, applicants must demonstrate they:
- Operate within an eligible region, which encompasses a significant part of regional Australia, refer to the map
- Contribute at least 75% of labour to the farm business;
- Earn at least 50% of income from the farm business;
- Own or lease land and use it for farming purposes.
Enterprises that are eligible for loan funding must use the funding for:
- Drought related activities;
- Refinancing up to 50% of a producer’s commercial debt;
- Enhance productivity; or
- Paying for operating expenses or capital.
To ensure your application is successfully processed it’s important to collate all loan application documentation in a manner that complies with the RICs requirements. A key RIC requirement involves demonstrating the farming operation is viable when it does rain which requires you to provide several years of forecast cashflows and a business plan for a normalised season.
In the short time that the RIC program has been available, prior to this Drought Package, Mazars has successfully secured agribusiness clients loan funding. In our experience, there are other associated challenges to address in addition to securing RIC approval, for example, there is a need to negotiate and communicate with the remaining mainstream bank in relation to their security arrangements post settlement and ensure a good relationship prevails for the future.
Applications for this concessional funding are currently open and will remain open for the foreseeable future. For more information about the program please visit the RIC website .
For assistance considering your eligibility for this concessional loan program and for support in submitting your application and supporting documentation, please contact your usual Mazars advisor or alternatively our Finance Consulting specialists, Owen Dingle and Angela Winton on:
+61 7 3218 3900
+61 3 9252 0800
+61 2 9922 1166
Published: 7 November 2019
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.