Regional Investment Corporation (RIC) Loans
You have probably heard recently that the government has announced changes to the Regional Investment Corporation Loan in response to the drought situation. The changes will include 2 years of interest free finance, 3 years of interest only and 5 years of principal and interest. The loans can be used to either refinance existing debt, or can be used for new debt (or a combination of both). These loans are for amounts up to $2m but will only extend to half of your existing debt levels if you are refinancing with RIC, or if you are looking to get additional funding for various projects, the RIC portion of your debt can only extend to half of your total borrowings.
By way of example, if you have $1m in debt with your finance provider and you are looking to refinance with RIC, (if you are successful) they will fund up to $500K of your existing debt. If you are looking to launch into new projects, you can potentially get access to an additional $1m, thereby retaining the RIC portion of your debt at 50%.
A few other points to note:
If you already have a RIC Drought Loan, the two year interest free period will be automatically applied to the loan.
The rate of repayment is structured so that the farm business does not have to repay the full principal in the final 5 years. At the end of the term loan, the farm business who has the loan will need to refinance the remaining loan balance with their finance provider.
In order to obtain this loan, the farm business must be in need of financial assistance and have sound prospects of long term financial viability.
Your existing finance provider must agree to the RIC arrangement.
To date, the wait times on processing of the application has been very slow, but we are hoping (now that the scheme has been revamped) for an increase in turnaround times.
What is the Small Business Drought Loan?
The Small Business Drought Loan is for amounts of up to $500K to small businesses that are non-farm but are dependant on the farming industry. The loan involved with have the first two years no interest and no repayment, followed by three years interest only and then five years of principal and interest.
Examples of business who may be able to access this loan will the Stock and Station agent, direct farm contractors or farm supplies retailer.
What can the loan be used for?
Generally the loans aim to help eligible farm businesses improve their long term strength, resilience and profitability. The main categories include:
Refinance or restricting existing debt
New debt for operating expenses and capital expenditure (ie. working capital to keep the farm operating.)
Who can apply?
You can apply for a drought loan if your farm business meets all of the following criteria:
Must be located in an eligible area,
Must have a drought management plan,
Must be in financial need of a loan,
Must have sound prospects of ongoing financial viability
For additional information on this, click below:
For the successful applicants that we know about, the whole process has taken the better part of a year before the funds are released, but we are hoping that this turnaround time will improve. If you would like us to do the application, we are set up to do this for our clients. The process is quite detailed – which is one of the reasons why so many people have been put off applying. If you can get the loan though, the effort is well worth it.