The Drought Recovery Concessional Loans Scheme is open for applications in New South Wales, Queensland and South Australia.
The Australian Government is providing up to $100 million in 2015–16 for Drought Recovery Concessional Loans to assist farm businesses experiencing unprecedented drought conditions to recover when the season turns.
The scheme will provide eligible farm businesses with loans of up to $1 million for a loan term of up to 10 years. Interest only repayments will be available to loan recipients for the first five years.
The loans are for planting and/or restocking activities (as seasonal conditions allow) and associated expenses.
More information on the scheme will be available from the relevant delivery agency below as they open. The scheme will not be available in all jurisdictions in 2015–16.
|Jurisdiction||Status of 2015–16 Drought Recovery Concessional Loans ||Website
|New South Wales||Open for applications||
NSW RAA||1800 678 593 |
|Queensland||Open for applications||
QRAA||1800 623 946|
|South Australia||Open for applications||
PIRSA||1800 182 235|
|Tasmania||Open for applications||
State Growth||1800 440 026|
Drought Recovery Concessional Loans are designed to help farm businesses recover from the effects of drought and return to viability in the longer term.
Drought Recovery Concessional Loans are only available to farm businesses that hold debt that has been established on commercial interest rates, terms and conditions.
To be eligible for a Drought Recovery Concessional Loan, applicants must demonstrate:
- their farm business has experienced a significant financial impact over at least a two year period (which can include the forthcoming season), causing a financial need for assistance
- their farm business has experienced a rainfall deficiency as indicated in the Rainfall Deficiency Report produced by the Australian Rainfall Deficiency Analyser
- equivalent to, or worse than, either a 1 in 50 year or 1 in 100 year rainfall event
- in Queensland—equivalent to, or worse than, a 1 in 10 year or 1 in 20 year rainfall event and evidence the farm business was involved in the direct consignment of live cattle to the export trade to Indonesia in at least two of the three financial years prior to 1 July 2011
- OR; if their farm business has not experienced a rainfall deficiency of at least a 1 in 50 year rainfall event, but has experienced a significant financial impact as a direct result of the effects of drought over at least a three year period (which can include the forthcoming season)
- seasonal conditions allow for eligible planting and/or restocking activities to commence
- their farm business has taken reasonable steps to prepare for the effects of drought, including the provision of an acceptable drought management plan
- they have the support of their current commercial lender(s) if a Drought Recovery Concessional Loan is approved
Scheme guidelines and application requirements are available from the appropriate delivery agency website for your state or territory as the scheme is opened.
Eligibility outside rainfall deficient areas
You may still be eligible for a Drought Recovery Concessional Loan if your farm business is not located in an area experiencing a rainfall deficiency equivalent to, or worse than, a 1 in 50 year or 1 in 100 year rainfall event.
You must be able to demonstrate that your farm business has experienced a significant financial impact that is a direct result of the effects of drought. The impact must occur over at least a three year period. This can include the forthcoming season where you can demonstrate your farm business will continue to experience a significant financial impact as a direct result of the effects of drought.
You must also demonstrate that you have undertaken reasonable steps and appropriate drought management activities outlined in your drought management plan for at least a three year period, which can include anticipated data for the forthcoming season, to prepare the farm business for the effects of drought.
Farm businesses in these circumstances will need to provide additional information to the delivery agency to demonstrate the financial impact of drought and drought management activities.
Effects of recent rain on eligibility
If a farm business has had recent rain, but has been experiencing drought conditions before that, you may still be eligible for the scheme. A farm business must have experienced one of the rainfall deficiencies listed above for at least 12 consecutive months over the previous two years.
To help determine your rainfall event, applicants will need to use the rainfall deficiency analyser tool developed by the Bureau of Meteorology. Information on how to access and use the tool is available on the delivery agency website for your jurisdiction.
More details on this element of the eligibility criteria is provided in the scheme guidelines, which will be made available through the delivery agencies as the scheme opens for applications in each jurisdiction.
Farm business affected by drought and the mid-2011 ban on live cattle exports
Loans for farm businesses directly impacted by the combined effects of drought and the mid-2011 disruption to live cattle exports to Indonesia are only available to eligible farm businesses in Queensland.
You must provide evidence that your farm business was involved in the direct consignment of live cattle to the export trade to Indonesia in at least two of the three financial years prior to 1 July 2011.
Evidence may include tax invoices, official receipts, freight notices, consignment notices and/or export contracts.
Drought Recovery Concessional Loans are available over a term of up to 10 years for planting and restocking activities, with an interest only period of 5 years.
A loan recipient will only need to make interest payments for the first five years of the loan term. However, interest and principal repayments are required for years 6 to 10. The principal and interest repayment amounts will be calculated on the basis of a 10-year loan term, meaning that a proportion (approximately half) of the principal will be repaid during the loan term. At the end of the loan term, you must repay or refinance any remaining loan balance. This may be achieved, for example, by obtaining commercial refinance. Some farm businesses may be in a position to repay the loan balance without refinancing.
If successful, you must draw down the entire loan amount within six months of your loan being approved. Once you have drawn down the loan, you will not be able to redraw on the loan at a later stage. Interest will therefore be calculated on the entire (or remaining) loan amount throughout the duration of the loan term.
As at 1 February 2016, Drought Recovery Concessional Loans have a concessional variable interest rate of 2.71 per cent. The interest rate will be reviewed every six months and, if necessary, revised.
Any change to the interest rate will be effective on 1 February and 1 August each year.
Any revisions will be in accordance with material changes to the Commonwealth 10 year bond rate, where a material change is taken to be a movement of 10 basis points (0.1 per cent).
Effect on debt levels
A Drought Recovery Concessional Loan will represent new debt.
A Drought Recovery Concessional Loan would provide a cash injection to farm businesses undertaking planting and/or restocking activities (when seasonal conditions allow) to generate much needed income as they recover from drought. These loans will not be able to be used for debt restructuring purposes.
A Drought Recovery Concessional Loan will not increase debt levels if it is solely used to refinance the operating expenses and/or drought recovery and preparedness component of a farm business’s existing Drought Concessional Loan.
Effect on lending arrangements
You should carefully read the scheme guidelines and consider whether there are matters that you should discuss with your current lender or financial advisor.
Taking up a loan under this scheme should not jeopardise your relationship with your lender.
Banks are familiar with the scheme and you should speak to your bank, financial advisor and relevant delivery agency to discuss what is best for your farm business’s circumstances.
Anecdotal feedback is that lenders generally support farmers taking up these types of concessional loans. Income generating activities, such as planting and/or restocking when seasonal conditions allow, gets farmers back to full production and leads to increasing longer term viability, which is in everyone’s interest —including the banks.
It is important that farm businesses do not self-assess their eligibility for a Drought Recovery Concessional Loan.
If you are still in drought and so cannot immediately replant and/or restock, and if your farm business meets all other eligibility criteria, you may still lodge an application. You may be approved on the condition that satisfactory seasonal condition information is to be provided prior to drawing down the loan. Successful applicants will have up to six months after their loan approval to provide this seasonal information in order to draw down the loan.
Once the scheme is open in your jurisdiction, you should contact your delivery agency for assistance and application details. The scheme will not be available in all jurisdictions in 2015–16.
Relationship with the Farm Finance Concessional Loans Scheme and the Drought Concessional Loans Scheme
Loan recipients under the Farm Finance Concessional Loans Scheme or the Drought Concessional Loans Scheme may also be eligible for a Drought Recovery Concessional Loan. To receive a Drought Recovery Concessional Loan, the farm business must meet the Drought Recovery Concessional Loan eligibility and loan assessment criteria. A Farm Finance Concessional Loan cannot be refinanced to a Drought Recovery Concessional Loan, but you may be eligible for this product as a separate loan.
The combined maximum loan amount available under the Drought Recovery Concessional Loans Scheme, Farm Finance Concessional Loans Scheme and Drought Concessional Loans Scheme is up to 50 per cent of total Eligible Debt to a maximum of $2 million in total. Within this, the amount for the Drought Recovery Concessional Loan component cannot exceed $1 million. The limits for the Farm Finance and Drought Concessional Loans Schemes are outlined in their respective scheme guidelines.
More information is available from your jurisdiction’s delivery agency.