Fighting drought by improving cash flow: grant and loan options

22 November 2019

Jayden Coulston, Manager, Business Restructuring |
Darren Stacey, National Leader, Finance Solutions
Partner, Debt Advisory

Primary producers across Australia are not alone when it comes to preparing for and fighting the effects of drought. Indeed, numerous grant and low-interest loan options are available across the country.

Federal assistance: The Regional Investment Corporation

Federal assistance is available in the form of the Regional Investment Corporation (RIC), which administers nationally consistent loans to encourage growth, investment and resilience of rural and regional Australia.

For drought-stricken producers, RIC can provide loans with an interest rate currently close to 3% (this rate is reviewed every six months) and a loan amount of up to $2 million, with a loan term of up to 10 years. There are no ongoing fees or charges, and repayments are deferred. The Federal Government just announced further changes that provide an interest-free period for these loans.

Terms and conditions apply of course, but the loan is designed to be used for:

  1. Refinancing a portion of existing debt which can free up cash flow by reducing principal repayments and lowering interest costs
  2. Provide working capital
  3. Fund capital expenditure for drought preparedness
  4. Restocking/replanting.

State assistance programs

In Queensland, the Queensland Rural and Industry Development Authority (QRIDA) is available to offer first-start loans for new businesses, as well as sustainability loans for existing enterprises needing to upgrade predominantly drought-related infrastructure. Loans of up to $2 million are available depending on the loan, with low interest rates and a loan term up to 20 years.

In New South Wales, the Rural Assistance Authority (RAA) provides a number of grants to producers suffering from drought. These include rebates and subsidies on water infrastructure and drought relief transportation, with a maximum amount available of $40,000 (depending on the grant). The RAA also provides interest free loans of up to $50,000 per annum under the Drought Assistance Fund and low interest loans of up to $1,000,000 per annum under the Farm Innovation Fund.

In Victoria, Rural Finance offers aid for pasture recovery management, emergency water infrastructure and on-farm infrastructure support. These grants come in the form of a 25% rebate up to $25,000, depending on the grant. More details on an additional drought fund will be available soon, which could provide up to $12 million to invest in drought preparedness, resilience and farm business planning.

For drought assistance in other states, please visit these links:

Farm business analysis

Finally, for those primary producers in Queensland, the QRIDA Farm Debt Restructure Office provides no-cost farm business analyses to help producers make informed decisions about the problems they are experiencing, with the help of independent farm debt restructuring specialists.

The process takes about eight weeks, and is available to producers who have owned their business for more than three years, have existing term debt, face financial stress, can demonstrate a need for assistance, and are not under administration or bank recovery action.

BDO can assist with your grant and loan options

Each agribusiness faces a different set of challenges and opportunities. Our Food and Agribusiness team can assist you to better understand government grants, succession plans and climate change initiatives. Our Debt Advisory team can help you evaluate your debt and finance options.

Get in touch today to speak with an experienced agribusiness adviser.