Loans to help your business

Regional Investment Corporation The interest free period only applies to loans applied for before September30, 2020.

Loans could they help you and your business?

BY CHRIS PUCKRIDGE RURAL FINANCIAL COUNSELLOR, RURAL WEST

In 2018 the Commonwealth Government established the Regional Investment Corporation (RIC) to assist farmers with drought recovery and preparedness and to help build producer’s export capacity and competitiveness.

But what does that mean for you?

In a nutshell, the RIC loans are an alternative funding option, with two types of loans available to primary producers: Drought Loans and Farm Investment Loans.

The Drought Loans are all about preparing and recovering from drought and are focused on water infrastructure and general drought recovery. The drought loans have a two-year interest free period and then three years interest only however, the interest free period will only apply to loans applied for before September 30, 2020; after this the drought loan will be more similar to the Farm Investment Loan. Although these may suit some producers in WA, in most cases the Farm Investment Loans will probably be more relevant to WA producers and you can discuss this with RIC on their direct line 1800 875 675. The Farm Investment Loans are designed for people planning to access markets interstate or outside of Australia, which is relevant to many of our fruit and vegetable growers. Of course, it is always important to determine if interest rates are a key factor in your businesses profitability or if other factors are more important.

Who is eligible?

There is a range of eligibility criteria, which can be reviewed on the RIC website, but importantly a grower must have a business plan, be financially viable and keep at least 50 per cent of their existing debt with a commercial lender. One of the key qualifiers is that you must have suffered a significant financial impact in recent years and the cause of the significant financial impact must be substantially outside the control of the farm business. For example, it may be because of drought or natural disaster, pest or disease outbreak, unexpected market closure or other significant events that are outside the control of the farm business. The Farm Investment Loans can improve your cashflow through refinancing existing debt and the loan can be used to fund operating expenses or capital improvements to your business. The maximum loan available is $2 million and the current interest rate is 1.92 per cent (variable and reviewed six-monthly). The term of the loans are 10 years, with the first five years interest only and the second five years requiring principal and interest. The remaining debt at the end of the 10-year period can be transferred to a commercial lender and there are no ongoing fees or charges.

Business planning might be the key?

To qualify for a RIC loan, you need to have a business plan, which states what you are doing now and what you want to do in the future. This is where we come in. Rural West has a very good business planning framework that adapts to various businesses. Our framework is based on the Harvard Business Planning Model and this has been used successfully across many industries all over the world to analyse and clarify what a business can do.