Welcome help at the start

For a number of years now, in consecutive submissions to Tasmanian governments for inclusion in their Budgets, the Tasmanian Farmers and Graziers Association has been seeking a HECS-style loan scheme for farmers who face long lead times between investment and return.

Typically, they might be start-up farmers establishing a horticulture-based business that involves soil preparation, sowing, plant management and eventual harvest. For a vineyard, for example, that could be anything up to seven years’ waiting time before coins reach the grower’s pocket.

In 2010, the TFGA told the Government that structures for debt and equity did not adequately address the problem.

“Banks are reluctant to lend for these purposes when first cash flow is so distant,” we said in our 2010 Budget submission.

“Farm enterprises commonly do not generate sufficient cash flow from other activities, such as sheep grazing, to meet the obligations of substantial loans. Nor are farmers often comfortable with — or, in some cases, able to offer — mortgages over the land.”

The result had been that most landowners invested, if they were able, in small units, hoping to expand incrementally as cash flow built. That made for a slow-growth industry at a time when investment should be rife.

What we have been seeking is a HECS scheme. For higher education students it has meant deferment of their tertiary fees until their working salary reaches a certain level and then it is automatically deducted with tax. With farmers, our proposition was that loans would be repaid as profits were generated from activities as they came on line.

This week we had success. The State Government announced a pilot $10 million AgriGrowth Loan Scheme, as it put it, “to help turn great ideas into long-term profit making enterprises”. It’s our proposed HECS scheme by a more appropriate name.

It enables farm and agrifood businesses to borrow between $30,000 and $1 million for projects where they have this problem of a long lead time. It is available to people involved in agriculture, fruit, wine and horticulture, aquaculture and beekeeping, agri-tourism, as well as downstream value-adding.

Irrigation is a use that immediately springs to mind.

At the same time, the Government is supporting Rural Business Tasmania to pilot a planning program to assist start-ups to take the plunge.

Both are great initiatives by the Government and we applaud them for it. These are the sorts of initiative we need to meet that target of increasing annual production to $10 billion by 2050.

For us, it means that we can keep farming, keep our heads above water as we literally plough our investments into the ground and nurture them through to maturity.

But it is also an encouraging signal for organisations like ours that continually put ideas to government that we feel are good for our industry and the wider economy.

Eventually, if the idea is sound, you may score a win.

THIS ARTICLE FIRST APPEARED IN THE TASMANIAN COUNTRY ON 11TH SEPTEMBER 2015
TFGA president Wayne Johnston