A GOVERNMENT plan to offer cheap loans to battling local farmers has backfired spectacularly amid claims it could cost up to $10,000 simply to apply.
The federal government last week unveiled its $60 million Farm Finance Package Concessional Loans Scheme, giving farmers access to loans of up to $650,000.
But local farming advocates have branded the package “bureaucracy gone mad”, saying the requirement to provide a five year business plan – and five years of tax returns – suffocated the application process in red tape.
“This is without question a political stunt and it will go nowhere,” Griffith-based rural counsellor Peter Gerarde-Smith said.
“They (the government) want to be able to say ‘look what we’ve done to help farmers’, but they’ve helped destroy farming for years in ways too numerous to mention.”
He was also critical of the 4.5 per cent interest rate and the five-year loan term, saying farmers with strong relationships with lenders could access only slightly higher loan rates.
“It’s going to cost $5000 minimum even to apply – the set-up costs are massive,” Mr Gerarde-Smith said.
“If you’re in a reasonable position with your bank, why would change that position by only saving a per cent or two for five years?
“They should be lower interest loans – about 3 per cent – and put together over a medium term. Short-term is no good in agriculture.”
Under the funding conditions, $30 million has been allocated in NSW for this financial year and the 2014/15 year, meaning only about 46 maximum loans could be accessed statewide in a given year.
Griffith accountant Danny Budd from DM Budd and Co said the scheme was doomed to fail.
“No one will apply for it, it’s that simple,” Mr Budd said.
“Never before in 40 years of practicing have I seen a government loan scheme ask for a five-year business plan and five years of tax returns from every person in the partnership.
“You can’t borrow to help your overdraft and you can’t borrow to buy equipment.
“It’s just too complex and there’s too much red tape.”
Federal agriculture minister Joel Fitzgibbon rejected the criticism of the scheme, saying it was designed to assist viable farm businesses.
“The ... package will help viable Australian farmers seize new business opportunities by allowing them to overcome difficulties with debt caused by drought, floods and market issues,” Mr Fitzgibbon said.
“The starting concessional loan interest rate is much lower than commercial bank loans and will be reviewed on a six-monthly basis.
“Farmers could save up to $81,000 in interest repayments over the five year concessional period based on a commercial interest rate of 7 per cent.
“Well-run and viable farm businesses will be able to comfortably meet the application requirements, such as providing a business plan and tax returns.”