These guidelines relate solely to the Concessional Loans Scheme of Farm Finance in Victoria.

Transcription

1 FARM FINANCE: CONCESSIONAL LOANS SCHEME These guidelines relate solely to the Concessional Loans Scheme of Farm Finance in Victoria. SCHEME GUIDELINES FOR VICTORIA FOR FURTHER INFORMATION: Telephone Fax Post GPO Box 1313 Bendigo Central Victoria 3552 Website

2 Table of contents FARM FINANCE: CONCESSIONAL LOANS SCHEME AT A GLANCE OVERVIEW OBJECTIVE CONCESSIONAL LOANS OUTCOMES APPLICATION PERIOD COSTS FUNDING AVAILABILITY FREQUENCY OF APPLICATIONS HOW TO APPLY AND KEY DATES LOAN ASSESSMENT ELIGIBILITY CRITERIA FOR LOAN ASSESSMENT ELIGIBLE DEBT LOAN ASSESSMENT CRITERIA SECURITY CONCESSIONAL LOAN CONDITIONS LOAN TERMS CONCESSIONAL INTEREST RATE CONCESSIONAL LOAN PAYMENT LOAN REPAYMENT EXTENUATING CIRCUMSTANCES LOAN AGREEMENT CONTRACTING ARRANGEMENT AND LOAN TERMS AND CONDITIONS LOAN REVIEWS INFORMATION REQUIREMENTS DECISION MAKING NOTIFICATIONS REVIEW PROCESS CONFLICT OF INTEREST ONUS ON THE APPLICANT PRIVACY STATEMENT DISCLAIMER MONITORING AND EVALUATION REVIEW OF GUIDELINES DEFINITIONS FARM FINANCE: CONCESSIONAL LOANS - VICTORIA Page 2 of 15

3 Farm Finance: Concessional Loans Scheme at a glance Key features of the Concessional Loans Scheme: loans of up to $ for eligible Farm Businesses to restructure existing Farm Business debt loan term of up to five years variable concessional interest rate initially set at 4.5 per cent interest only payments are available for up to five years full repayment of loans required at the end of the loan term The availability of loans is subject to funds being available. The Scheme is capped at $30 million per year for and (total of $60 million). No more loans will be offered once this cap is reached. Should you read on? To help decide whether you and your Farm Business are eligible to be considered for a Concessional Loan, you should answer yes to these questions: 1. Does my Farm Business have a demonstrated history of meeting its debt servicing requirements? 2. Is my Farm Business in need of assistance to meet its current debt servicing requirements? 3. Does my Farm Business have the ongoing support of its commercial lender(s)? 4. Can my Farm Business meet all its financial commitments over the next five years if a Concessional Loan is provided? 5. Can my Farm Business repay the Concessional Loan within five years, for example, through successfully obtaining commercial refinance? 6. Can my Farm Business provide sufficient security for the Concessional Loan? To be eligible for a Concessional Loan, you must: 1. demonstrate that you and your Farm Business: meet the eligibility criteria to be assessed for a Concessional Loan (see Clause 8) meet the criteria for eligible debt (see Clause 9) meet the Concessional Loan assessment criteria (see Clause 10) 2. complete and submit an application form (available at with: the required supporting documentation including confirmation of your long-term viability; and a five year Business Plan 3. provide satisfactory security for the loan (see Clause 11). FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 3

4 Farm Finance: Concessional Loans Scheme These guidelines relate solely to the Concessional Loans Scheme of Farm Finance in Victoria. 1 Overview 1.1 Objective Farm Finance is an Australian Government initiative that aims to build the ongoing financial resilience of Farm Businesses, including through the provision of Concessional Loans. In Victoria, the Concessional Loans Scheme will assist Farm Businesses experiencing debt servicing difficulties but are considered potentially viable in the longer term. 1.2 Concessional Loans The Australian Government will provide $30 million per year (a total of $60 million over two years from ) for the provision of Concessional Loans to eligible Farm Businesses in Victoria. This Concessional Loan Scheme of Farm Finance in Victoria will be delivered by Rural Finance utilising funds provided by the Australian Government. Loans of up to $ are available to eligible Farm Businesses to restructure existing eligible debt. The approved loan amount will be determined by Rural Finance. The Concessional Loans are available for loan terms of up to five years at a variable concessional interest rate (initially set at 4.5 per cent). At the end of the loan term, Loan Recipients will be required to repay their Concessional Loans. Under Extenuating Circumstances, loans may be considered for a further term of no more than two years, however these loans will be subject to commercial terms and conditions including principal and interest repayments. The availability of loans is subject to sufficient funds being available. Once these funds are expended, no more loans will be offered. 1.3 Outcomes The intended outcomes for the Concessional Loans Scheme are that: Farm Businesses able to demonstrate their need, their ability to repay a loan and that they can provide sufficient security, are able to apply for a Concessional Loan the full value of the loans is provided to Farm Businesses experiencing debt servicing difficulties that are considered Commercially Viable in the longer term receipt of a Concessional Loan provides the opportunity for Loan Recipients to improve their debt servicing capacity. FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 4

5 2 Application period Funds will be allocated in a single application period for each year in and Details of each application period including the opening date, the closing date and the funds available during each period will be determined by Rural Finance and announced and published ahead of time on Rural Finance s website ( 3 Costs Applicants are responsible for all costs incurred in the preparation and lodgement of a Concessional Loan Application. Successful Applicants will be required to pay any actual costs associated with establishing and maintaining the loan (e.g. statutory fees such as title searches, mortgage registrations, personal property securities register searches and registrations and personal and corporate background checks). After the concessional interest rate period, Loan Recipients will be required to meet statutory charges associated with debt refinancing such as mortgage discharge fees. Loan Recipients entering into a revised loan agreement under Extenuating Circumstances will also be required to pay usual commercial lending fees and charges. 4 Funding availability The availability of Concessional Loans is subject to funds being available. The funds available under the Concessional Loans Scheme are capped at $30 million per year for and (total of $60 million). No more loans will be offered once this cap is reached in either year. Funds will be allocated across each application period. If the funding allocations are fully committed prior to the closing date of an application period, the application period will close early and no further Applications will be considered in that period. If this happens, notification of the early closure of the application period will be publicised on Rural Finance s website and those who have already lodged an Application will be advised in writing. Any Uncommitted Funds in will not carry forward to Frequency of Applications If an Application is declined in the first year, Applicants can reapply in a subsequent year. 6 How to apply and key dates An application form and these guidelines are available on Rural Finance s website ( FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 5

6 Eligible Applicants should lodge completed application forms including required documentation to Rural Finance at: GPO Box 1313 Bendigo Central Victoria Fax: Applications submitted by facsimile or must be received by 5pm on the application period closing date. Posted Applications should be post marked or show other evidence of dispatch by no later than the closing time and date prescribed for each application period. Applications lodged after the advertised application period closing dates in any other circumstances will be withdrawn. If the funding allocated for an application period is fully committed before the closing date, all subsequent Applications will be withdrawn. Details of application periods, including opening and closing dates and funding allocations will be available on Rural Finance s website or by contacting Rural Finance on Complete Applications will be assessed and funding provided in the order of receipt at the discretion of Rural Finance. 7 Loan assessment Completed Applications will be assessed in the order of receipt. Loan offers will also be subject to the availability of funds. Rural Finance may liaise with the Applicant, their bankers and professional advisors as required to confirm and verify documentary evidence and information provided. Incomplete Applications will not enter the assessment queue until all required information is provided by the Applicant. If an Applicant does not provide the required supporting documentation, detailed in a checklist in the application form, their Application will be withdrawn. Where necessary, Rural Finance has the right to request further information from the Applicant to assess their Application. If the further information requested is not provided within the required timeframe the application assessment will not be finalised and the application withdrawn Rural Finance will seek to visit and inspect a Farm Business to assist the assessment and decision process. 8 Eligibility criteria for loan assessment In order to be eligible to have their Application for a Concessional Loan assessed, Applicants must have lodged a completed Application with all the required supporting documentation. As the funds available under the Concessional Loans Scheme are capped, Applicants should note that lodging an Application does not guarantee that they will receive a Concessional Loan. FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 6

7 Applicants will be assessed on the eligibility criteria in place at the time they lodge a completed Application (noting that these criteria may be reviewed and amended in the future). To be eligible for a Concessional Loan in Victoria, an Applicant must demonstrate that: they have owned and operated the Farm Business for at least the past five consecutive years, and their Farm Business: o o o o o operates as a sole trader, trust, partnership or private company; and is involved within the agricultural, horticultural, pastoral, apicultural or aquacultural industries; and is wholly located in Australia; and is registered for tax purposes in Australia with a Australian Business Number (ABN) and is registered for GST; and is not a public company under the meaning of the Corporations Act 2001 (Cth); and 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; and the majority of their Farm Business is conducted in the state of Victoria; and at least one Member of the Farm Business is an Australian resident; and they have the ongoing support of commercial lender(s) with the Concessional Loan assistance; and their Farm Business is not under External Administration or bankruptcy; and the Applicant has not received a loan under the Farm Finance: Concessional Loans Scheme in any jurisdiction. 9 Eligible debt Concessional Loans in Victoria are only available to refinance Farm Business related debt that has been established upon commercial interest rates and terms and conditions. Examples of ineligible debt may include: private or family debt not provided at arm s length and at commercial interest rates and terms and conditions equipment finance facilities non-balance sheet loans funding of normal or additional working capital (e.g. overdraft facilities). FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 7

8 10 Loan assessment criteria Applications from Eligible Applicants for the restructuring of eligible debt will be assessed by Rural Finance against the following loan assessment criteria. Applicants will be assessed against the loan assessment criteria in place at the time their completed Application is lodged (noting that these criteria may be reviewed and amended in the future). An Eligible Applicant for a Concessional Loan must demonstrate that: their Application is for the reduction of eligible debt; and they have taken all reasonable steps to service the debt; and their Farm Business has been and is continuing to experience difficulties servicing its debt; and they have a financial need for a Concessional Loan; and their Farm Business has the capacity to repay the Concessional Loan and sound prospects for a return to Commercial Viability within the term of the Concessional Loan; and their Farm Business has the ongoing support of its current commercial lender(s) for the availability of additional necessary carry-on finance; and the amount of Non-Farm Assets and Liquid Assets owned by the Applicant or the Members of the Farm Business is not more than the amount needed for prudent risk management; and they are able to provide satisfactory security acceptable to Rural Finance and commensurate with the amount of the loan. Eligible Applicants must also provide an acceptable Business Plan. Information required to be included in the Business Plan is listed in the Concessional Loan Application form. 11 Security Successful Applicants must provide Rural Finance with satisfactory security in accordance with Rural Finance s established security requirements and commensurate with the amount of the loan. The security provided must include: a) a registered mortgage over land or other assets satisfactory to Rural Finance; and b) any other security Rural Finance considers necessary. Where applicable, assets provided as security must be insured (e.g. against fire) to the satisfaction of Rural Finance. Applicants are advised that Rural Finance reserves the right to act under its securities where terms and conditions are not met or default occurs. FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 8

9 12 Concessional Loan conditions 12.1 Loan terms the term of a Concessional Loan is up to five years a variable concessional interest rate will apply to Concessional Loans Successful Applicants must sign a Concessional Loan Agreement with Rural Finance and provide satisfactory security commensurate with the amount of the loan Successful Applicants will be required to pay actual costs associated with the establishment of the loan (e.g. searches and registrations) Loan Recipients will be required to fully repay their Concessional Loan by the end of the loan term Full details of individual loan terms and conditions will be set out in the Concessional Loan Agreement Concessional interest rate A variable concessional interest rate will apply for the five years of each Concessional Loan. An initial concessional interest rate of 4.5 per cent per year has been set by the Australian Government as at 1 July This rate will be reviewed and revised if necessary by the Australian Government on a six monthly basis in accordance with material changes to the Commonwealth five year bond rate. A material change is taken to be a movement of 10 basis points (0.1 per cent). If the interest rate is changed, the change will be effective from 1 February and/or 1 August each year as applicable, from 2014 on. Loan Recipients will be notified in writing and via Rural Finance s website when the changes take effect Concessional Loan payment The full Concessional Loan amount will be paid by Rural Finance to commercial lenders for the direct reduction of a Loan Recipient's approved eligible debt as specified in the Concessional Loan Agreement Loan repayment The repayment amounts and repayment frequency offered to Successful Applicants will be determined by Rural Finance based on its assessment and will be detailed in the Concessional Loan Agreement. The minimum repayment in the five year concessional period is the interest component. Conditions relating to loan repayments, arrears, defaults and penalties will be as detailed by Rural Finance in the Concessional Loan Agreement. At any time during the five year term of the Concessional Loan, Loan Recipients may prepay the whole or any part of their loan. FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 9

10 In circumstances where Loan Recipients enter into a revised loan agreement under Extenuating Circumstances loan repayments will be on a principal and interest basis and usual commercial lending fees and charges will apply. In no circumstances can Loan Recipients redraw on repaid Concessional Loan amounts Extenuating Circumstances At the completion of the Concessional Loan term any outstanding loan balance must be fully repaid, unless a Loan Recipient can demonstrate to Rural Finance Extenuating Circumstances. To be considered eligible by Rural Finance under Extenuating Circumstances, a Loan Recipient s Farm Business must: demonstrate it is currently unable to access finance on normal commercial terms and conditions to repay its Concessional Loan; but be assessed as having sound prospects of being able to transition to normal commercial lending arrangements within a period of no longer than two years from the expiry of the Concessional Loan. Loan Recipients who can demonstrate Extenuating Circumstances will be required to enter into a revised loan agreement with a term of no more than two years from the expiry of the Concessional Loan to repay their loan. Rural Finance will determine the applicable commercial interest rate for the revised loan, including any adjustments to the rate. The revised loan agreement will be subject to commercial terms and conditions. Loan Recipients will be required to make principal and interest repayments and pay any other usual commercial fees and charges as detailed in a revised loan agreement. 13 Loan agreement 13.1 Contracting arrangement and loan terms and conditions Successful Applicants will be required to enter into a Concessional Loan Agreement with Rural Finance. The Concessional Loan Agreement will be for the term of the loan. The Concessional Loan offer may lapse, if not signed by the Successful Applicant, in a timeframe specified by Rural Finance. Applicants should note that no contractual arrangement will exist with Rural Finance until a Concessional Loan Agreement is signed by the Successful Applicant. The terms and conditions of the Concessional Loan Agreement will be in accordance with these guidelines and otherwise will be in accordance with Rural Finance s standard commercial or other terms and conditions of lending, if any (available on By signing the Concessional Loan Agreement, the Successful Applicant agrees that they are subject to compliance requirements specified in the Concessional Loan Agreement. If any information provided in the Application is found to be untrue, false, or misleading, recovery action of the loan may be undertaken, the matter may be referred to the relevant law FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 10

11 enforcement authorities or regulator of the Victorian or the Australian Governments for prosecution of any civil or criminal offence. Applicants should be aware that giving false or misleading information is a serious offence under the Criminal Code Act 1995 (Cth) or relevant State equivalent. It will be a condition of the Concessional Loan Agreement that if a Loan Recipient s position or circumstances change significantly during the term of the Concessional Loan this will entitle Rural Finance to review the terms and conditions of the loan. If a Loan Recipient s position or circumstances change significantly, or there are any breaches of the terms and conditions of the loan as specified in these guidelines and the Concessional Loan Agreement, Rural Finance may decide to initiate recovery or other remedial actions as permitted under the Concessional Loan Agreement Loan reviews Loans will be reviewed at least annually by Rural Finance to monitor compliance and ongoing capacity of the Farm Business to meet the terms and conditions of the Concessional Loan Agreement. The final loan review will include an assessment by Rural Finance of a Loan Recipient s capacity to repay the loan by the expiry of the Concessional Loan term Information requirements Loan Recipients will be required to provide information in line with requirements as stipulated in the Concessional Loan Agreement. 14 Decision making In administering the Concessional Loans Scheme, Rural Finance will use its expertise to assess and decide Applications for Concessional Loans, in accordance with these guidelines, its usual credit assessment processes and any relevant Victorian legislation Notifications Rural Finance will provide formal written notification of the assessment outcome to each Applicant, including reasons for the decision to declined Applicants Review process Requests to review a decision must be submitted in writing to Rural Finance within 20 business days of receipt of the original decision notification from Rural Finance. Applicants should ensure they provide Rural Finance with sufficient information outlining the reasons for their dissatisfaction with the decision. This should include: specific information, verified by independent sources, confirming the basis of disagreement with the original decision FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 11

12 factors an Applicant believes may have been overlooked by Rural Finance in determining eligibility to receive a Concessional Loan relevant information an Applicant believes may have assisted the original Application, but may not have been included for consideration. Within 30 business days of receiving a request for a review of a decision, Rural Finance will make the decision regarding the review, and give notice to the Applicant of the review decision. Written requests to review a decision should be forwarded to: Rural Finance GPO Box 1313 Bendigo Central Victoria Conflict of interest In line with Rural Finance s policy for managing conflicts of interest, Rural Finance will take all reasonable measures to ensure its officers involved in assessing and making decisions in relation to Applications under the Concessional Loans Scheme do not have any conflicts of interest. 15 Onus on the Applicant Applicants are responsible for ensuring they have read and understood these guidelines and all documents referred to in these guidelines. Before applying for a Concessional Loan under this Scheme or making any decision, Applicants should seek advice from their legal, business and financial advisors. It is the Applicant s responsibility, if successful, to ensure they have read and understood all aspects of the loan conditions and the Concessional Loan Agreement terms and conditions. Applicants should note that past financial assistance under any other program is not a reliable indicator of eligibility for a Concessional Loan under this Scheme. Applicants can contact the Australian Tax Office call centre to discuss business tax enquiries on Privacy statement Information provided by Applicants may be used by Rural Finance and/or the Australian Government for administration of the Concessional Loans Scheme and assessment of an Application. Provision of information (personal or otherwise) constitutes the Applicant's consent to Rural Finance and/or the Australian Government using the information for the above mentioned purposes and any other incidental or related purpose. Rural Finance and/or the Australian Government may disclose your personal information to any party engaged in the assessment or evaluation of the Concessional Loans Scheme in any jurisdiction. Rural Finance and/or the Australian Government will store personal information collected through the Application, supporting FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 12

13 documentation, the Concessional Loan Agreement and any monitoring and evaluation activities in compliance with their respective obligations under the Information Privacy Act 2001 (Vic) and the Privacy Act 1988 (Cth). You may access or correct your personal information at any time by contacting Rural Finance via or in writing to the address provided on the front of these guidelines. 17 Disclaimer Rural Finance does not accept any common law duty of care towards Applicants in relation to this Scheme or any information provided in relation to this Scheme and Rural Finance will not be liable for any loss or damage however caused (including the negligence of Rural Finance), suffered or incurred by Applicants in connection with this Scheme or any information provided by Rural Finance in relation to this Scheme. 18 Monitoring and evaluation The Australian Government will conduct an evaluation to determine the extent to which the Concessional Loans Scheme is contributing to Australian Government policy objectives. Loan Recipients may be requested to provide information to assist in the evaluation at times during the loan period. 19 Review of guidelines The Australian Government reserves the right to review, revoke or vary these guidelines, in consultation with Rural Finance, at any time. Potential Applicants will be advised of revised guidelines through Rural Finance s website. 20 Definitions Applicant: means an owner of a Farm Business that has lodged an Application for a Concessional Loan. Application: means the Concessional Loan Scheme application form and associated documentation that an Applicant must complete and lodge with Rural Finance to apply for a Concessional Loan. Business Plan: means a document which outlines how the Applicant intends to improve its Farm Business future Commercial Viability with the support of the Concessional Loan over its loan term. Concessional Loan: means a loan provided under the Concessional Loans Scheme at a concessional interest rate made by Rural Finance to Successful Applicants utilising funds provided by the Australian Government. Concessional Loan Agreement: means the contractual agreement between a Successful Applicant and Rural Finance which details the terms of the loan for the duration of the loan until fully repaid. FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 13

14 Commercial Viability: means a Farm Business is commercially viable when the business generates sufficient net profit after fixed and variable expenses to: service borrowings at commercial interest rates; and allow investment on-farm to maintain the farm s productive assets; and provide for an adequate standard of living for its Members of the Farm Business; and provide funds for investment which increases long-term productivity. Eligible Applicant: means the Farm Business whose Application is eligible to be assessed for a Concessional Loan, by Rural Finance, in accordance with these guidelines. Extenuating Circumstances: refer to Clause 12.5 External Administration: means, in respect of a body corporate, that an administrator has been appointed in accordance with the Corporations Act 2001 (Cth). Farmer: means a person who has a right or interest in the land used for the purposes of a Farm Business (as defined in the Farm Household Support Act 1992 (Cth)). Farm Business: means a business that: a) operates as a sole trader, trust, partnership or private company; and b) is involved within the agricultural, horticultural, pastoral, apicultural or aquacultural industries; and c) is wholly located in Australia; and d) is registered for tax purposes in Australia with an Australian Business Number (ABN) and is registered for GST; and e) is not a public company under the meaning of Corporations Act 2001 (Cth). Farm Finance: means an Australian Government initiative that aims to build the ongoing financial resilience of Farm Businesses. Farm Management Deposits: means a Scheme provided by the Australian Government to assist primary producers to deal more effectively with fluctuations in cash flow. Liquid Assets: means immediate funds, including cash immediately available in personal and business bank accounts, term deposits, shares, Farm Management Deposits and other financial accounts. Loan Recipient: means a Successful Applicant that receives a loan through the Concessional Loan Scheme. Member(s) of the Farm Business: means a person who has a right or interest in a Farm Business. Non-Farm Assets: means the net value of any asset not essential to the effective running of the Farm Business, including land or property, residential (not used as the primary place of residence) or business, for the Applicant or any Member of the Farm Business (as applicable), excluding life insurance policies and superannuation, provided the superannuation is in a complying superannuation fund for the purposes of the Superannuation Industry (Supervision) Act 1993 (Cth). FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 14

15 Rural Finance: means a statutory authority of the Victorian Government established under the Rural Finance Act 1988 (Vic) delivering the Concessional Loans Scheme in Victoria. Successful Applicant: means an Eligible Applicant that satisfies the loan assessment criteria and has been offered a loan through the Concessional Loans Scheme. Uncommitted Funds: means allocated funds for an application period that have not been committed to provide Concessional Loans to Successful Applicants. FARM FINANCE: CONCESSIONAL LOANS SCHEME GUIDELINES FOR VICTORIA 15