Young farmers are coming out of the woodwork to register an interest in borrowing up to $2 million to help them get started in their own farming enterprise.
About 600 aspiring farm owners have pre-registered to take out a 10-year, low interest AgriStarter loan through the federal government's specialist lender, the Regional Investment Corporation.
Formal applications won't be accepted until January next year, but RIC chief executive officer Bruce King said the level of interest already shown in a funding package which did not actually exist just yet was an indicator of the pent up demand from younger farm sector participants looking to strike out on their own.
"The AgriStarter loan opportunity talks very strongly to the demand from young people trying to get into agriculture," he said.
"They could be wanting a chance to buy land of their own for the first time, or looking at how they can take over a family business from their parents as part of a farm succession strategy."
Full details about the program will not be available until government funds are officially approved in an upcoming sitting of federal parliament.
Ag needs new blood
However, Mr King said the government had been crystalising its response to a financial need within the industry since last November, having earlier mooted plans for special young farmer concessional loans during the May 2019 federal election campaign.
Encouraging more young players into agriculture was considered an important goal given the peak in Baby Boomer generation producers now reaching retirement age, and the cost challenges facing anybody looking to buy farmland, livestock or machinery.
AgriStarter loans will be at an interest-only rate for the first five years (with the current variable rate at 1.92 per cent) followed by principal and interest repayment terms for the next five years.
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Applicants will need to have an adequate equity base to qualify and be able to demonstrate their ability to repay their loan and operate a viable, long-term farming business.
Applicants also must show they actually need concessional financial assistance.
Importantly, RIC required about half the borrower's total debt to be held with a commercial lender.
Although other RIC loans can apply to farm-related small businesses, the AgriStarter package will be available to property-based purchases only.
Billion dollar book
Last week the Regional Investment Corporation, established at Orange in NSW just two years ago, allocated its one billionth dollar in farm sector lending.
A total of 995 government-backed loan applications have been approved since the concessional lender opened its books.
The vast majority - 635 applications for loans worth $715m - were approved last financial year as RIC brought in additional personnel and improved its approval processes to cope with a surge of drought-related and drought recovery demand for funds.
Loan application approval processes continued to ramp up, with at least 90 loans valued at more than $100m getting the green light in July.
Long waiting time
However, Mr King conceded the time taken to approve loans and get funds into a customers' accounts was still at least twice as long as he was comfortable with.
Average loan applications and debt refinancing packages had required four to 4.5 months to get through the approval phase, and possibly two more months, or more, before lending arrangements were settled.
"Unfortunately the extra government criteria which applies to our service and the fact we're dealing with other banks as part of our dual lending arrangements has made our initial processes much slower than expected," he said.
"We're not happy with it.
"We're very well aware it's taking too long and we are very focused on increasing the processing speed for loans at every step, including developing standard operating procedures with agribusiness banks to support settlement times."
I'm looking forward to reducing our turnaround times by half
- Bruce King, Regional Investment Corporation
Last month's federal government announcement of an extra $50m in extra capacity funding support over four years would help RIC bring hire more personnel and further upgrade its management systems and processes to cope with borrowers expectations and the "incredible demand we're receiving for our loans".
"Our people are country-based with very strong regional connections and empathy with our customers - we want to provide a much faster service," Mr King said.
"I'm looking forward to reducing our turnaround times by half," he said, indicating a target closer to three months, or less.
RIC's approval rate for loans, once applications were formally submitted for assessment, was more than 85pc.
Most customers have used funds to refinance to up half their existing bank loans for up to $2m.
However, since last November, the opportunity to take advantage of two-year interest-free loans to cover restocking and crop planting costs has generated a surge of interest, particularly when seasonal conditions began to improve in many parts of eastern Australia.
The two-year interest-free period on Drought Loans and AgBiz Drought Loans ends on September 30.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
