Weather News

Farmers waiting up to a year for drought loans to be assessed

Tim Fookes, Wednesday January 29, 2020 - 13:28 EDT
ABC image
The Federal RIC is under pressure to speed up the process of approving drought loan applications. - ABC

Farmers across Australia battling drought are having to wait up to a year to see if they've been approved for a loan from the Federal Government.



As part of the recent extension to the government's drought stimulus package, farmers are able to borrow up to $2 million and pay it back over a 10-year period.

The first two years are interest free with no repayments, followed by a three-year interest-only period with another five years to pay the loan back.

The Regional Investment Corporation (RIC) is responsible for managing the loan application process, but some farmers have had to wait between six and 12 months to hear whether their loan application had been accepted.

"Farmers just want to know if they're eligible," NSW Farmers Association Orange branch chair Bruce Reynolds said.

"At the moment, farmers are in limbo as the process of getting these loans is very slow.

"It's taking up to a year after applying and they're still waiting for a result to see if their application is approved."



Mr Reynolds said while there were challenges, including getting approval from banks, the Federal Government could improve the time it was taking for the loans to be processed.

"The whole thing needs to be sped up because producers need to be able to access loans quickly in the middle of a drought, and if they are turned down they can look at other finance options," he said.

Lengthy loan process

The RIC said it had received an increase in loan applications since changes to loan conditions were announced in November.

RIC chief executive Bruce King said prior to November they were receiving about 10 applications a week, but that number had risen to between 40 and 50 a week.

"We've seen a significant increase in demand for these loans," Mr King said.

"We have 45 staff involved in the process from start to finish, and have added more staff in recent months.

"We are putting forward a case that there is a need in RIC for more resources to better handle and improve the timeliness of our responses."

Since June 2019, the average time it's taken each loan application to be assessed is 187 days, with RIC assessors looking through the applications for 65 of those days and the rest being assessed by banks.

"We see the process as a partnership between the person applying for the loan, the bank, which is required to retain at least 50 per cent of the debt, and the RIC," Mr King said.

"We have to negotiate the amount of security the banks and the RIC will hold, and there's a fair amount of time considering the application with the applicant.



"RIC only set up in Orange NSW 11 months ago, and it has taken a while to bed down and understand the processes that we are improving.

"For some early loan applicants, there have been experiences where it has taken a much longer time to get their loan approved."

Mr King said, in the six months to December, more than 190 drought loan applications were approved, with the average loan just over $900,000.

"Our aim is to get the amount of time each loan application is with RIC assessors down from 65 to 45 working days," he said.



Banks blamed for hold-up

Federal Drought Minister David Littleproud pointed the finger at the commercial banks who he accused of holding up the loan application process.

"The banks have been dragging their feet in providing the priorities for mortgages," Mr Littleproud said.

"[The banks processes] have delayed the amount of time it takes for us to be able to get the money back out there to farmers.

"We are working as closely as we can with the banks and we will make sure that whatever resources are required by the Regional Investment Corporation will be provided.

"We are saying to the RIC, you have to respond quickly but the banks have to as well."

Mr Littleproud said he had told the Australian Banking Association they needed to come up with a protocol to ensure banks allow RIC to get applications processed.

National Farmers Federation president, Fiona Simson, believed more resources for RIC could speed up the application process.

"It needs to be quicker, whether it's a matter of resourcing the organisation or providing more rural financial counsellors to help farmers fill out the forms," Ms Simson said.

"We can't afford the loan application process to take six months.

"The banks need to cooperate. We need to find the blockages to get the money out to farmers quickly.

"If you're getting a $2 million loan that's interest free for the first two years, getting it through the RIC can save a farmer in excess of $100,000. It's worth it."


- ABC

© ABC 2020

More breaking news

Sydney Morning Herald
ABC News
9News
News Limited

Display Your Local Weather

Weather News

Tasmania snow just part of life in Central Highlands lakeside town of Miena

13:38 EST

As the wood fire smoke swirls up, mingling with the snowflakes, the chimneys are barely visible, poking their heads through the snow covered rooftops.

Unsettled spell for WA

12:30 EST

A slow moving low will bring a period of wet and windy weather to Western Australia over the next few days.