Frequently Asked Questions
Drought Concessional Loans Scheme (DCLS) ‒ Western
Australia
V3 12 February 2015
Updates at www.agric.wa.gov.au/rbdc
Briefly
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$20 million is available to eligible drought affected farm businesses in WA.
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Applications close at 5.00 pm on 30 June 2015 or until funding is fully committed,
whichever occurs first.
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The DCLS loans have a term of five years, with the possibility a further two (2) years
if there are ‘extenuating circumstances’.
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The loan amount is limited to 50% of eligible farm business debt, to a maximum of
$1 million, at an initial concessional interest rate of 3.84%.
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DCLS loans can be used to restructure an existing FFCLS loan.
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Drought concessional loans will be available for any combination of Debt
Restructuring, Operating Expenses, and Drought Recovery and Preparedness
Activities.
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Farm businesses will need to demonstrate they are in a ‘drought’ area by first
obtaining a valid ‘Rainfall Deficiency Report’ from the Australian Bureau of
Meteorology (BoM).
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The Drought Concessional Loans Scheme in Western Australia is administered
through the Rural Business Development Corporation (RBDC) on behalf of the
Australian Government. The Department of Agriculture and Food, Western Australia
will provide services to the RBDC to administer the loans.
Why is the eligibility criteria based on the Bureau of Meteorology’s data
instead of individual rainfall and/or state/territory based data and records?
The Australian Government has set all eligibility criteria for the Scheme. The Bureau of
Meteorology’s rainfall dataset allows for a nationally consistent, independent, repeatable
and timely approach to determination of rainfall deficiency assessment.
The Bureau’s data is based on long-term records from an extensive network of
standardised rainfall gauges and consistent observation practices. The data has
undergone world-leading quality control and thorough review to ensure it conforms to
international best practice standards set by the World Meteorological Organisation.
Supporting your success
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Rainfall data that is not part of the Bureau’s national dataset was not considered reliable
for the purpose of assessing loan applications under the Drought Concessional Loans
Scheme, as it has not been collected using standardised instruments and observation
practices or undergone sufficient quality control or review.
What is a Rainfall Deficiency Report?
A valid Rainfall Deficiency Report indicates if your farm business is located in an area that
has experienced:
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A rainfall deficiency, which is equivalent to, or worse than, a 1 in 20 year rainfall
deficiency event (a rainfall deficiency at or below the 5th percentile), which extends
for 12 months or more within the latest two year period, as assessed by the Bureau
of Meteorology.
If your report shows that your farm business, whether wholly or partially, is located in
such an area, the report will be considered evidence, should you be able to
demonstrate a significant financial impact has or is being experienced (as required in
Section 4 Part B in the Application Form), that this significant financial impact is a
result of the effects of drought, and not as a result of other causes/reasons. This
means that you have met clause 11c of the Drought Concessional Loans eligibility
criteria.
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A rainfall deficiency, which is equivalent to, or worse than, a 1 in 10 year rainfall
deficiency event (a rainfall deficiency at or below the 10th percentile), which
extends for 12 months or more within the latest two year period, as assessed by the
Bureau of Meteorology.
If your report shows that your farm business, whether wholly or partially, is located in
such an area, then you must provide evidence of a significant financial impact has or
is being experienced (as required in Section 4 Part B in the Application Form), as
well as significantly reduced income and/or significantly increased expenditure that is
directly related to drought conditions (as required in Section 4 Part D in the
Application Form).
If your farm business is not located wholly or partially in either of these rainfall deficiency
areas, you will not meet clause 11c of the Drought Concessional Loans eligibility criteria,
and therefore are not eligible for assistance under the Drought Concessional Loans
Scheme. You could consider the existing Farm Finance Concessional Loans Scheme,
which is not specific to a particular reason for hardship (such as drought) – applications
close 30 April 2015, subject to funding.
How do I request a BoM Rainfall Deficiency Report for my farm business?
A report can be obtained using the Bureau of Meteorology – Australian Rainfall Deficiency
Analyser. The valid Report must be submitted with your application within 60 days of the
‘Date Produced’ date on the report. The Australian Rainfall Deficiency Analyser weblink is
accessible via www.agric.wa.gov.au/rbdc.
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Can I submit an application without a BoM Rainfall Deficiency Report?
No. Applications received without this report will be regarded as incomplete and will not
enter the assessment queue. Information on how to obtain the report is available on the
Rural Business Development Corporation (RBDC) website via www.agric.wa.gov.au/rbdc.
Can I use my own rainfall records as evidence that drought has financially
impacted my farm business in my application?
No. Under the scheme guidelines, the RBDC will only accept a valid BoM Rainfall
Deficiency Reports as evidence that a farm business has experienced the necessary
rainfall deficiencies.
The Drought Concessional Loans Scheme is a national program. Using Bureau rainfall
data ensures a consistent, objective and equitable assessment of each application
regardless of where the farm business is located.
I currently do not fall in either a 1 in 20 or 1 in 10 event. Does this mean that I
am not eligible for a Drought Concessional Loan?
If your Rainfall Deficiency Report does not show that your farm business has experienced,
either wholly or partially, a rainfall deficiency which is equivalent to, or worse than, a 1 in
20 year or 1 in 10 year rainfall event which extends for 12 months or more within the last
two years, you are not eligible for assistance under the Drought Concessional Loans
Scheme.
However, it is important to note that the Bureau of Meteorology updates the rainfall
deficiency data used for the summary maps and reports on a monthly basis. Updates
occur on the 22nd day of each month (or the next business day). As such, the eligibility of a
particular area in terms of meeting Clause 11(c) as outlined in the scheme guidelines may
change with time.
There is also assistance for farm businesses through other Australian Government
programs, including loans under the existing Farm Finance Concessional Loans Scheme,
which is not specific to a particular reason for hardship (such as drought). For farm families
experiencing hardship, the Interim Farm Household Allowance helps meet daily living
expenses and is available Australia wide.
What if I disagree with my BoM Rainfall Deficiency Report?
Applicants who wish to request a review about the decision on their loan application
should contact the RBDC. Information about this process is detailed in Section 16 of the
scheme guidelines.
It will not be possible for an applicant to achieve any alterations to data presented in the
Bureau of Meteorology Rainfall Deficiency Report irrespective of supplementary
information provided.
This is because rainfall data that is not part of the Bureau’s national dataset cannot be
relied upon for the purpose of assessment for consideration under the Drought
Concessional Loans Scheme, as it has not been collected using standardised instruments
and observation practices and undergone sufficient quality control or review.
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Why is the map on my BoM Rainfall Deficiency Report different to the Rainfall
Deficiency Summary Map on the webpage?
The Bureau of Meteorology analyses rainfall for all periods between 12 and 24 months
long, in each two year assessment period for every individual grid cell across Australia.
This equates to 91 potential time periods. The analysis determines which grid cells in a
particular area have recorded a rainfall value at or below the 1 in 20, or 1 in 10 year rainfall
deficiency thresholds.
The map shown on your Rainfall Deficiency Report displays only the driest of these 91
potential periods at the specified coordinates during the two year assessment period. For
example, if your farm business experienced its driest period from 1 February 2012 to
31 January 2013, rainfall deficiencies for only this particular twelve month period will be
shown on the map of your location and surrounding area on the Rainfall Deficiency Report.
This period might not represent the lowest rainfall deficiencies for the other areas shown
on this map, outside your location.
The Rainfall Deficiency Summary Map, however, shows the lowest rainfall percentiles
recorded for every grid cell over all of the 91 potential periods in each two year
assessment period. As such, the maps will be different.
I have a Farm Finance Concessional Loan; can I also apply for a Drought
Concessional Loan?
Yes, however, the combined maximum loan amount available under the Drought
Concessional Loans Scheme and the Farm Finance Concessional Loans Scheme will be
up to 50 per cent of total eligible debt to a maximum of $1 million.
For what purposes are Drought Concessional Loans available?
Drought Concessional Loans are available for the purposes of restructuring existing
eligible debt (including a Farm Finance Concessional Loan) and providing new debt for
operating expenses or drought recovery and preparedness activities, or a combination of
these.
Will I have to meet principal payments during the term of the Drought
Concessional Loan?
No. Interest only payments are available for the loan term.
At any time during the five year term of the Drought Concessional Loan, however, loan
recipients may prepay the whole or any part of their loan without incurring any additional
fees.
How do I demonstrate that the significant financial impacts experienced by
my farm business are as a result of the effects of drought?
Applicants must obtain a Rainfall Deficiency Report before submitting their application.
This report will show if your farm business is located in an area experiencing either a 1 in
20 year rainfall deficiency or 1 in 10 year rainfall deficiency.
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If your report confirms that your farm business is in a location which has experienced at
least or worse than a 1 in 20 year rainfall deficiency, then the Report will be considered as
sufficient evidence that the significant financial impacts are due to the effects of drought.
You still need to provide evidence of the Significant Financial (and Production) Impact as
per Section 4 Part B in the Application Form and Q8 in the Drought Management Plan, but
not prove that the cause of the Impact was due to drought.
If your Report indicates your farm business is in a location which has experienced a 1 in
10 year rainfall deficiency, evidence must be provided of significantly reduced income
and/or significantly increased expenditure that is directly related to drought conditions. You
need to provide evidence of the Significant Financial (and Production) Impact as per
Section 4 Part B and Part D in the Application Form and Q7 and Q8 in the Drought
Management Plan to prove that the cause of the Impact was due to drought.
Should your Report indicate neither of the above outcomes, then you are not eligible for a
Drought Concessional Loan.
Do I need to have the on-going support of my commercial lender?
Yes. The scheme guidelines require your commercial lender to support the proposed
arrangements for a Drought Concessional Loan.
Can an overdraft balance be included in the calculation of eligible debt?
No. The scheme guidelines state the funding of normal or additional working capital is an
example of ineligible debt. Therefore, in normal circumstances overdraft facilities will be
excluded from your eligible debt calculations.
Exceptions will be considered where there is clear evidence (for a period of more than one
year) of a significant hard-core component of the overdraft facility.
Will I have to pay loan establishment or other costs for a second time if I am
successful in my application to refinance my Farm Finance Concessional
Loan to a Drought Concessional Loan?
Successful applicants will be required to meet the actual costs of establishing the Drought
Concessional Loan, e.g. costs of title searches, mortgage registrations. These costs are
expected to range between $184 and $750. However, if you are refinancing your Farm
Finance Concessional Loan, utilising the same security, the RBDC may not need to
undertake some of the activities associated with the establishment of a new loan, thereby
keeping any additional costs to a minimum.
Applicants who, after the five year term, are approved under Extenuating Circumstances
for an additional term of up to two years will be required to pay a non-concessional interest
rate, principal and interest payments, and cover the annual loan administration costs.
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Can I apply to refinance a Farm Finance Concessional Loan into a Drought
Concessional Loan?
Yes. However, applicants wishing to refinance a Farm Finance Concessional Loan must
refinance their entire loan with a Drought Concessional Loan, and any interest accrued to
the date of refinance must be paid by applicants.
Applicants will need to satisfy the eligibility and loan assessment criteria for the Drought
Concessional Loans, as well as any reporting requirements of the Farm Finance
Concessional Loans Scheme loan, such as proof of expenditure.
Can an ABN which is held in different names from the names of the
applicants be used to support the application?
No. The applicants must have their own ABN and be registered for GST.
If I bought my farm business less than three years ago, would I be eligible for
a Drought Concessional Loan?
No. The scheme guidelines require applicants have owned and operated their farm
businesses for at least the past three consecutive years.
What if there are two or more related businesses involved? Are all the
businesses eligible to apply for their own Drought Concessional Loan?
For related businesses to be eligible in their own right, they would each need to satisfy all
the eligibility and loan assessment criteria within the scheme guidelines.
If the farm business was carried on by, say, a partnership for part of the
required three year trading period and, on accountant’s advice, the operating
entity was changed to a company or family trust, is the new entity eligible for
a Drought Concessional Loan?
Yes, provided the same parties/principals have been involved in the business for at least
three years and all other scheme criteria are met.
If I am approved a Drought Concessional Loan to partially restructure my
existing fixed rate commercial bill facility, will the break costs which may be
charged by my commercial lender as a result of the prepayment of the bill
facility be covered?
No. Break costs are a transaction between your commercial lender and yourself and any
such costs will be your responsibility. You will need to weigh up the financial benefits of the
Concessional Loan against the likely financial cost of breaking your fixed rate contract.
If you have a fixed rate facility due to mature shortly, it may be possible to temporarily
delay the drawdown of the Drought Concessional Loan to coincide with the expiry of the
fixed rate contract. However, Drought Concessional Loans should be drawn down within
six months of approval.
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How and when would an applicant qualify for Extenuating Circumstances?
Extenuating Circumstances will only be considered in the fifth year of the Drought
Concessional Loan period. At that time, the applicant must demonstrate that they are
genuinely unable to access finance on commercial terms to repay the loan and they must
demonstrate sound prospects of being able to transfer to commercial lending
arrangements within a period of no longer than a further two years.
If approved under Extenuating Circumstances, an applicant would be offered a revised
loan agreement for no more than two years and repayments will then need to be on
commercial terms, including principal repayments.
Information
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Please read through the DCLS Scheme Guidelines for full details on the scheme.
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Further clarification can be obtained by contacting the RBDC Freecall number of
1800 198 231 or by emailing rbdu.loans@ agric.wa.gov.au.
Important disclaimer
The Chief Executive Officer of the Department of Agriculture and Food and the Rural
Business Development Corporation and the State of Western Australia accept no liability
whatsoever by reason of negligence or otherwise arising from the use or release of this
information or any part of it.
Copyright © Western Australian Agriculture Authority and the Rural Business Development Corporation, 2015
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