Investing - Livestock Loans

Frequently Asked Questions

Investing - Livestock Loans

What is a livestock loan?

Traditionally, livestock agents, who buy and sell cattle and other livestock on behalf of farmers, have provided working capital to their farmer clients from their own capital or overdraft facilities. SocietyOne provides lending facility to livestock agents to help them fund farmers' livestock purchases.

What are the loans used for?

Livestock agents may only use the loan to fund purchases of trading livestock (such as cattle) for fattening by their clients.

Where are loans provided?

Currently NSW, WA, QLD, VIC, SA and ACT.

What are the loan terms?

The maximum term for cattle is 18 months.  The maximum term for lambs is 6 months.  The loans are repaid, on average, within 9 months.

How are loans evaluated?

SocietyOne's credit team and loan origination system assesses borrowers' creditworthiness using best practice credit assessment techniques. Credit facilities are only given to livestock agents who meet SocietyOne's credit requirements. Once a credit limit is approved the livestock agent may draw down against this facility to purchase livestock for their farmer clients. Each draw down is an individual loan on our system. Investors may take a fractional part of each loan.

What returns will I receive?

Investors currently receive 10% p.a. as a gross return on each loan. Interest accrues and compounds monthly. Target returns after defaults are in the vicinity of 8%-10%. From February 2014 to today there have been no payment shortfalls or defaults. This asset class has performed strongly although we note that past performance is not indicative of future performance..

How do I invest?

You choose the types of loans in which you wish to invest and the maximum amount you wish to invest in any one loan when completing your Investment Agreement We call this a mandate. SocietyOne takes care of the rest. We bid for loans on your behalf in accordance with your choices.

Can I choose the loans I invest in?

Currently you can choose the types of loans in which you invest, but not individual loans. SocietyOne currently offers loans for beef cattle and lambs.

What is the security for the beef cattle loan?

Four types of security are provided:

  • A Purchase Money Security Interest over the livestock. This is registered on the Personal Property Security Register
  • A General Security Agreement over the livestock agents' business & this is registered on the Personal Property Security Register
  • Personal guarantees from the directors of the livestock agents
  • Investors capital is paid in priority to the livestock agents 10% share of the loan.

How are the cattle tracked?

Radio-frequency identification (RFID) tags are placed in the cattle's ears. These use electromagnetic fields to wirelessly transfer identification and tracking data from the tags to the National Livestock Identification System database (NLIS) operated by Meat and Livestock Australia. The tags are scanned at the saleyard and linked to the farmer's property identification code (PIC). If cattle is moved from a farmer's property or sold, by law, the changes must be registered on the NLIS. 

How are the livestock loans settled?

SocietyOne has engaged a settlement office to manage loan settlements when livestock is purchased.

The settlement office uses its technology and expertise to arrange for completion of all required documentation, advance funds on receipt of purchase invoices from the sales yards, maintain the required interface with the NLIS and provide executed documentation to SocietyOne.

Is the interest rate fixed or variable?

The interest rate is fixed for the life of the loan. It accrues and compounds monthly.

How often do investors receive payments?

This investment does not provide a regular or consistent income stream. Interest and capital are repaid upon full or partial (pro rata repayment) sale of the funded livestock. On average loans are repaid in full after 9 months.

What happens when the loan is repaid?

You may elect to leave your funds in cash, reinvest both capital and interest in further loans or reinvest the principal component only.

What are SocietyOne's fees?

Borrowers pay an establishment fee of 1% if the loan application is successful and fully funded. This fee is capitalised onto the loan and funded by investors. SocietyOne receives a Servicer Fee of up to 1.65% p.a. of the amount of the loan for originating and managing the loan through to repayment. The Servicer Fee is deducted from borrowers' repayments before returns are paid to investors.

Is the investment liquid?

Livestock loans are not a liquid investment as there is currently no secondary market to sell loans. Loan investments are held for the term of the loan unless the borrower repays early (which they may do without penalty). Each loan has a maximum term of 18 months; however, on average loans are repaid within 6 to 9 months.

What are the risks?

Major risks include a shortfall upon sale of the secured livestock due to lower market prices, which are not adequately offset by the weight gain of the funded herd or loss of cattle through natural causes. Where there are any shortfalls there is recourse back to the livestock agent as borrower on record and the investor is at this point exposed to the credit risk of the borrower. Investors are advised to read and understand the investment Memorandum in detail and in particular the section on risks.

What happens if a borrower defaults?

SocietyOne adheres to strict credit control protocols and passes loans to a collection agency when a borrower is in default. If a borrower does not repay the loan, you will lose your investment in that loan.

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