As described in our 10 February issue, Land Bank’s new retail emerging markets (REM) financing package involves a business loan. It is not a handout or welfare grant, and is aimed at those unable to secure finance because they have no collateral (security) to offer a bank. The loan is also for farmers in communal tribal areas who have a Permission to Occupy (PTO) granting them access to land for at least five years.
Interest on REM loans ranges from 3% to 5% and can increase in succeeding years. We received several queries from readers. Some of these are dealt with below:
- A ‘business’ cannot apply for this financial package – only an individual. This person must be a full-time farmer in primary agriculture who is unable to access financing anywhere else. Be warned, though: this excludes anyone who has been declared insolvent and remains ‘non-rehabilitated’. Credit checks are carried out to ensure that applicants are not blacklisted for non-payment of accounts, so check with the credit bureaus to make sure you have a clean record. The law allows you one free check a year.
- The maximum loan is R1 million.
- Once an application has been been received by Land Bank, approval takes about a month.
- Financing will not extend for longer than the PTO/lease period.
- Clients must graduate to the commercial level of the bank within five years, although the bank might extend this to seven years.
- Repayments are structured according to the production cycle of the crop planted.
- Instalment sale financing (ISF) for livestock can be repaid over a period of up to eight years. ISF for movable assets, such as tractors, can be repaid over five to seven years.
- Short-term financing is in the form of production credit and a crop cession is required (see panel below).
- Mid-term financing is available for fencing, irrigation, boreholes and fixed improvements, and can be repaid over five to 10 years (this also requires a crop cession).
- While ‘buying cards’ are given out for the purchase of inputs, cash will be paid for wages.
Contact a Land Bank branch office for application forms. The bank will provide someone, free of charge, to write a business plan for you.
Contact Susan Pletts at 082 572 3724, or susan@wanyuka.co.za.
