Access to funding or drought support for amounts up to $2 million with a loan term of 10 years at 1.77% variable interest rate can be beneficial, if not critical, for farming business. However, many farmers are put off by the onerous application processes… but a little bit of help can make an enormous difference.
To date I have helped clients successfully apply for around $10M to $12M through Regional Investment Corporation Drought Loans, creating combined cashflow savings of around $2,000,000.
While it’s important to be realistic that completing drought loan applications is time consuming, (we estimate it can take up to 50 hours and there can be up to 100 supporting pieces of evidence), don’t let the process prevent you from applying for funds that could make a significant positive impact on your business.
Horses for courses
While some business owners are more adept at completing the loan application paperwork and documentation requirements than others, we have seen firsthand the frustration experienced by business owners focusing their energy on applying for drought loan applications. Understandably completing the complex application process is not in their core skillset, and they often suffer the overwhelming feeling of ‘biting off more than they can chew’.
To accommodate the range of skills (and time availability) of our clients, we have created a loan application service that is limited to paying for what you need.
For example, some clients just want to talk through the process in a couple of hours and manage the application themselves, whereas others need assistance with specific requirements, such as compiling seasonal budgets, drought management, recovery or scenario planning.
In our experience, the best solution is for you to use your time effectively and let us help in the areas where we can add most value.
The bigger picture
Getting a little help with drought loan applications usually has additional far-reaching benefits for you and your business too. It’s not just about a successful loan application, there is real value in utilising the insights identified during the application process.
Because drought loan applications consider long-term viability and take different aspects of your business into account, the common bi-products of loan documentation may include accurate cash flow forecasting and production planning that can help you to better understand the big picture. These findings can help you make more informed decisions that are aligned to your long-term business and personal financial goals.
As a specialist in rural finance and agribusiness solutions, I bring financial planning and cash flow forecasting, mortgage broking and business consulting services to the table. And as an accredited P2P Agri adviser, I work with clients to run 5-year scenarios using real financials (with consideration of normal, good and poor seasons) to investigate sustainability of the loan and cash flow requirements.
The fine print
Drought loans have specific requirements for how funds can be used including preparing for, managing through or recovering from drought. The lending criteria includes a requirement for the business to be financially viable in the long run. There are also expectations that the loan will be used to restructure your existing debt, fund operating expenses that will sustain the business during the drought and for capital purchases or re-stocking after drought. Consideration of large capital purchases such as machinery purchases should be included in drought loan applications.
As a rule, most loans for agri-businesses are assessed on a case-by-case basis and are subject to much stricter lending criteria than standard business loans. I invite you to find out more and read my tips for preparing drought loan applications.
At Financial Services SA, we have a personal interest in helping farming family businesses implement practical solutions to help them make the most of their situation. I have assisted primary producers and family business owners in rural and remote locations for more than 35 years.
If you would like to discuss available drought support or you would like assistance with drought loan applications, I encourage you to contact me today on 08 8253 2906 or email firstname.lastname@example.org
Phillip Dibben is a financial adviser at Active Financial Management. Active Financial Management and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306 trading as Fortnum Financial Advisers.
This information does not consider your personal circumstances (including taxation) and is of a general nature only. You should not act on the information provided without first obtaining advice specific to your circumstances.