Alternative Funding Arrangements for Farmers
With the continuing dry primary producers are needing to look at alternative funding arrangements, outside of bank funding. We have seen good outcomes achieved by utilising the support mechanisms of QRIDAs first start and sustainability loans. Now it's exciting to see the new Farm Business Loans offered by Regional Investment Corporation (RIC) which prepares, manages and helps farmers recover from drought.
The RIC allows farmers, doing it tough due to factors outside their control, to access government-funded low interest loans of up to $2 million.
Since launching on 1 July 2018, the RIC has been out talking to farmers and trusted financial influencers about its farm business loans and applications have started to come in with several loans being approved already.
There are two types of loans available:
- Drought loans – to prepare for, manage through or recover from drought
- Farm Investment Loans – improve the strength, resilience and profitability
Both types of loans are for farmers in financial need. They have a 10 year loan term, the first five years are interest only. Pay some principal in the remaining five years and then refinance remaining debt with a commercial lender at the end of the loan. Eligible applicants must keep 50% of their loan amount with their commercial lender. With a variable interest rate of 3.58% and loans of up to $2 million dollars they are an attractive form of finance.
RIC loans can be used for a variety of farm-related activities including refinancing existing commercial debt, or accessing new debt for operating expenses and capital improvements and is capped at the $2 million mark. The aim of the program is to work with existing commercial financiers rather than replace them.
Other farmers may want to access new debt for operating expenses and capital improvements like paying bills, buying feed, desilting dams, planting new crops or agisting livestock.
During an interview with RIC interim CEO, Matt Ryan, he reported “There’s a lot of interest in refinancing existing debt with the RIC, as the savings are significant – the difference between our 3.58% rate and a commercial rate may put an extra $40,000 into a farmer’s pocket each year when refinancing $2 million with us.”
Don’t be reluctant to talk to your bank about refinancing. RIC works in partnership with your existing bank, similar to a joint funding arrangement. RIC have been discussing the funding with banks, and word is getting out about how they can work together for the benefit of the farmer.
There is an eligibility criteria for each loan however farmers should not assume they are not eligible. Many farmers have been pleasantly surprised as to what is available to them through the RIC loans. As it is a federal program, the eligibility criteria are the same across Australia.
For more information about the loans including eligibility visit ric.gov.au, call the RIC team on 1800 875 675 or alternatively speak to your Hanrick Curran advisor about accessing funding solutions for your business.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.