Last month the Government announced changes to the Drought loan scheme
The biggest change is the enhancement of Drought loan terms to offer 2 years interest free, 3 years interest only and 5 years principal and interest.
These loans are for amounts of up to $2 million.
Key points:
- Drought loans are available for farmers to feed, water, freight, restock, refinance, or anything that might keep their operation going
- All Drought loan applicants, including existing Drought loan customers, will be able to enjoy the two-year interest free period from 1 January 2020
- Small business Drought loans also available
Announced as an enhancement, we asked someone fully immersed in RIC interest free Drought loan applications for primary producers, Carrick Aland’s Jenny Lambley.
Jenny believes RIC interest free Drought loans are worth looking at, because more applicants than not are eligible. And there are several ways to get the ball rolling.
How do RIC interest free Drought loans work?
Jenny has recently guided two Carrick Aland clients through loan applications and successfully helped them to obtain funds.
“We helped the first client start their FHA[1] forms but they said they’d fill in their own RIC application without our assistance, using their own budgeting tools,” says Jenny. “Then they met with their RIC Officer and supplied extra information and received funds 8-9 months later. Carrick Aland were on hand to assist with any queries or financial reports that were needed.”
“Our second client started their RIC application in November 2019. They completed the initial paperwork and brought it back to me so I could fine tune the information around plant value, etc and then handed it back so they could submit it.”
Even before they’d set out, Jenny was asked if the whole process was worth it.
“My reply was if you get a $800,000 loan for two years, then it’s definitely worth a go,” says Jenny.
“And, by January this year, they’d had confirmation from RIC about their eligibility so now we’re working on the extra budget information requirements to make sure their application is viable. In this case our client is preparing their own budget scenarios in Excel, but Carrick Aland can assist with budgeting on spreadsheets or in Xero.”
Both clients needed more land to drought proof and then the drought hit. Using funding they’re now able to diversify their farming operations and grow crops or fodder to feed cattle, build herds and sell livestock.
“Even if they have a couple of bad years, it’s better than nothing,” says Jenny. “Both clients have good relationships with their banks, so can potentially refinance their loans.”
Both clients are also forward-looking so are viewed favourably by their lenders, including the RIC.
“Yes there is a lot of application criteria and an applicant’s drawings come into play so it pays to be responsible when spending and to show willing to try and answer as many questions as possible.”
“It is possible to work through an interest free Drought loan application yourself, but it can pay to work with Carrick Aland to discuss the process and decide how much of our input might be required before you set out to do one.”
“The key is NOT TO self-assess,” Jenny warned.
How does Carrick Aland help?
Carrick Aland can provide initial guidance right through to full project management services, including being your ‘Application Nominee’ point of contact for agency enquiries during the process.
“Once an application commences, applicants are assigned a one-time key. Some clients like to involve Carrick Aland as their Application Nominee by handing over their key so we can contribute to their application by providing the SWOT[2] Analysis, factors affecting the farm operation now and in the future and budgets.”
Carrick Aland also sense checks overall applications prior to submitting. Once an application is submitted, no further changes can be made, however there is a right of appeal which may require an extra set of accounts to be prepared – extra insight that Carrick Aland has thanks to their RIC interest free Drought loans team brains trust.
“A typical query that arises is who owns the assets. It’s amazing how people have a trust which owns their asset (not individuals) which is something we can readily confirm and supply the required paperwork,” Jenny added.
What are the benefits?
During prolonged period of drought and the hardship that goes with it, RIC interest free Drought loans cover farmers’ income in the absence of rain.
“The FHA is absolutely massive at the moment,” says Jenny. “When people are stoic about getting through the drought under their own steam, we remind them that this is the government giving back after years of paying taxes which can make the difference when catching up on bill paying or getting some groceries on the table.”
“Plus agencies are allocating a lot of resource to managing successful applicants with follow up and support. The downside is that income has to be reported every fortnight which can be challenging in primary production, but it’s their way of avoiding potential overpayments.”
If you don’t have a go, the answer is ‘no’
Before you embark on an application, check the information you will need to provide as a common cause of loan assessment delay is missing information.
Talk with your commercial lender. Let them know that you plan to apply for a RIC loan and then gather the required information. An application cannot be assessed until all your information has been received, including attachments of rates notice, bank statements, water rights, tax returns, property titles, proof of identity (100 points) and other important documents at the date of claim (if older documents are submitted it can be a point of rejection, but you usually have 14 days to respond).
“It can be easier to go into Centrelink first thing with everything you need and just wait it out,” says Jenny. “Nothing happens until everything is supplied, especially personal papers such as bank account statements and credit card statements.”
“The good news is that Carrick Aland can provide the latest tax returns and current financial year Profit & Loss reports so we make it easy to organise those as well as any additional forms for trusts or companies.”
Carrick Aland project manages to make sure you’re on track to get an application over the line and funds in the bank.
“We have to know each client to be successful and that’s what we do,” says Jenny. “Our Client Managers collaborate across all our offices to lean on our whole team’s expertise and play to our strengths.”
“Carrick Aland is across all the programs currently available which means we can pinpoint suitable assistance for our primary producers.”
“While it’s on offer, take it now because you don’t know how long it’s going to last,” Jenny added. “Our Client Managers can start you off and get you going.”
Extra reading and resources
- RIC Interest Free Drought Loan factsheet
- https://www.ric.gov.au/help/announcements
- https://www.ric.gov.au/drought
- DROUGHT support and financial assistance
