The new year has seen the announcement of a new loan program from the Regional investment Corporation (RIC). The AgriStarter program consists of two kinds of loan, either succession loans or ‘first farmer’ loans, both with low interest and attractive terms in an effort to support new farm business owners.
- Succession loans are available to help with succession activities, including the outcomes required following succession planning, as well as the planning process itself.
- First farmer loans are available for the purchase of a farm business (or the purchase of a controlling interest in a farm business) and for the development of a new farm business, which may include the purchase of land, infrastructure, livestock or operating expenses.
The terms of these loans are consistent with other RIC loans on offer: Ten-year terms, interest only payments for the first five years, principal and interest for the final five years. Interest rates are variable (1.77% currently, to be revisited each February and August) and the maximum loan amount is $2 million or up to 50% of total farm debt held under commercial terms.
The list of eligible loan uses is extensive, providing tremendous scope for the use of funds. However, the list of eligibility criteria for applicants is also quite lengthy. In a nutshell, ‘first farmers’ must not have previously held the majority interest in a farming business other than the one in which they are applying. First farmers must also have at least three years’ experience and they must be intending for the farm business to be their principle business pursuit.
To apply for the succession loan, you must have recently inherited or acquired, or will inherit or acquire, a farm business or farm assets under a succession plan.
One of the most confusing points listed for eligibility requires the production of commodities for ‘constitutional trade or commerce’. Fundamentally this means the farming business must produce commodities that are destined for trade between states and territories of Australia, or between Australia and outside Australia. The applicant does not have to sell directly into these interstate or international markets, but into a supply chain that will distribute into those markets. We believe that the majority of our farming clients would meet this criterion.
As mentioned, a maximum of 50% of total farm debt can be held in Commonwealth-funded concessional loans, including other RIC loans. The remainder must be held as commercial debt, under commercial terms. The new loan can be used for new debt, refinancing existing debt, or a mixture of both. Lastly, the AgriStarter loan must be fully withdrawn within six months of signing a RIC loan agreement. Principal, interest or both can be repaid early without penalties.
We are unsure of turnaround times for the RIC to process these loan applications and understand RIC have been heavily criticised on this matter in other programs. However, YBM believe this loan could offer tremendous support to new farm businesses. We would be happy to assist you with any questions or with the application for these loans if needed. Have a look at the website, check the guidelines, or give us a call.