Dairy Recovery Concessional Loans - Questions and answers

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Which states offer Dairy Recovery Concessional Loans?

Dairy Recovery Concessional Loans are available to eligible dairy farm businesses affected by the Murray Goulburn, Fonterra and National Dairy Products decisions to retrospectively drop farm gate milk prices in:

What can Dairy Recovery Concessional Loans be used for?

Dairy Recovery Concessional Loans can be used to:

  • restructure existing debt
  • provide new debt for operating expenses
  • provide new debt for productivity enhancement activities
  • any combination of the above.

Examples of these are detailed in the guidelines, which are available from the relevant delivery agency in your state.

How do I know if I’m eligible?

It is important that dairy farm businesses do not self-assess their eligibility for a Dairy Recovery Concessional Loan. Please contact your delivery agency for assistance and details on the application process.

In applying for a Dairy Recovery Concessional Loan you must demonstrate that:

  • you own and operate a dairy farm business
  • your farm business supplied milk to either Murray Goulburn and/or Fonterra and/or National Dairy Products or their subsidiaries or related companies in 2015–16
  • your farm business has existing eligible debt and has not already borrowed up to 50 per cent of its total eligible debt (i.e. a farm business cannot access a dairy recovery loan worth more than 50 per cent of their total eligible debt)
  • your farm business is commercially viable in the long term
  • your farm business has the capacity to repay the loan
  • your farm business has the ability to provide sufficient security against the loan.

Full eligibility and loan assessment criteria can be found in the guidelines, which are available from the relevant delivery agency in your state.

What is eligible debt?

Eligible debt means debt that has been established upon commercial interest rates, terms and conditions and/or debt to a dairy processor. Your farm business must have existing eligible debt to be eligible for a Dairy Recovery Concessional Loan.

The total eligible debt held by a farm business will determine how much a farm business may be able to borrow under the scheme. The maximum amount of a Dairy Recovery Concessional Loan cannot be more than 50 per cent of the total eligible debt of the farm business. Total eligible debt is the sum of all debt components your farm business holds that are considered to be eligible debt.

Eligible debt includes existing debt that has been debt restructured under a Farm Finance Concessional Loan or a Drought Concessional Loan. Such debt is included because it was originally established upon commercial interest rates, terms and conditions.

Why can’t I borrow 100 per cent of my farm business’s total eligible debt?

The maximum amount of a Dairy Recovery Concessional Loan cannot be more than 50 per cent of the total eligible debt of the farm business. This is a consistent requirement across all of the Australian Government’s concessional loans schemes for farm businesses. The government understands the importance of maintaining the relationship between a farm business and its commercial lender and, as such, does not intend to hold a farm business’s entire debt. This is also consistent with the Australian Government’s prudent approach to lending public money.

Does eligible debt include creditor debts or an overdraft?

Creditor debt and debt to other organisations and businesses is outside the scope of the scheme. Eligible debt may include debt owed on an overdraft facility, which would be determined on a case-by-case basis and would depend on the individual circumstances of the applicant.

Will I be taking on additional debt with a Dairy Recovery Concessional Loan?

Dairy Recovery Concessional Loans can be used to restructure existing debt or take on new debt.

You can restructure existing debt, including an existing Farm Finance Concessional Loan and/or a Drought Concessional Loan. Debt restructuring does not add to a farm business’s overall debt. These loans can provide debt relief for eligible farm businesses by refinancing some of their existing debt at a lower rate of interest.

Dairy Recovery Concessional Loans can also be used for operating expenses or for productivity enhancement activities – which would represent new debt.

I’ve heard the application process is too hard. I’m not sure whether I should apply?

It is important that you do not self-assess your eligibility for a Dairy Recovery Concessional Loan.

Delivery agencies are there to help answer any questions you have regarding the application process and the eligibility requirements. Please contact your delivery agency for assistance and details on the application process if you are interested in applying for a loan.

I don’t supply milk to Murray Goulburn, Fonterra or National Dairy Products. Why am I not eligible?

Although several processors have made decisions to cut farm gate milk prices for the 2016–17 season, Dairy Recovery Concessional Loans are targeted at dairy farm businesses affected by the retrospective pricing decisions, made late in the 2015–16 season, by Murray Goulburn, Fonterra and National Dairy Products.

I’m in a reasonable financial position. Can I still apply for a loan?

You are not required to provide evidence of financial hardship to apply for a Dairy Recovery Concessional Loan.

It is important that you do not self-assess your eligibility for a Dairy Recovery Concessional Loan. Please contact your delivery agency for assistance and details on the application process.

What if I sharefarm or lease. Am I eligible for a dairy loan?

Sharefarmers and leasees are not excluded from the eligibility criteria and can apply for a Dairy Recovery Concessional Loan. Like all other applicants, you will have to satisfy eligibility requirements including the capacity to service the loan and to provide satisfactory security.

Are New Zealand citizens eligible for a concessional loan?

As for the current drought-related concessional loans schemes, to be eligible for a Dairy Recovery Concessional Loan, at least one member of the farm business must be an Australian Citizen or Australian Permanent Resident. If you are unsure about your visa or residency status, you can contact the Department of Immigration and Border Protection on 131 881 or visit border.gov.au.

Due to the drop in milk prices, I’m now working off farm to supplement my income. Am I still eligible to apply for a loan?

Undertaking temporary off farm work to supplement your income and ensure the long term viability of your business, does not specifically exclude you from receiving a loan.

It is important that you do not self-assess your farm business’s eligibility for a Dairy Recovery Concessional Loan. The guidelines state that ‘at least one member of the Farm Business must be a Farmer who, under normal circumstances, contributes at least 75 per cent of his or her labour and derives at least 50 per cent of his or her income from the Farm Business.’ You should contact the relevant delivery agency in your state to discuss your circumstances.

What level of security is necessary to apply for a loan?

The Australian Government takes a prudent approach to lending public money and key to this is requiring satisfactory security over any concessional loan. The delivery agency makes an assessment on the level of loan security needed, taking into account the individual circumstances of the applicant.

Can livestock or water be considered for the purposes of securing a loan?

Each delivery agency determines the type and level of security required for a loan. Livestock, water and other chattels may be considered as a form of loan security. Decisions of the delivery agency on security will depend on the individual circumstances of an applicant and state-specific legislation.

I’m concerned about having to go to my bank to discuss security issues for a mortgage with a delivery agency.

You are encouraged to have early discussions with your existing financier around the proposed loan and security arrangements. Mortgage priority arrangements are settled through mutual agreement with the applicant, the applicant’s bank and the delivery agency.

Who can I talk to about the dairy loans and the eligibility requirements?

It is important that you do not self-assess your farm business’s eligibility for a Dairy Recovery Concessional Loan.

For assistance and details on the application process, please contact the relevant delivery agency in your state.