Investing - SocietyOne AgriLending

Frequently Asked Questions

Investing - SocietyOne AgriLending

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 AgriLending provides an alternative for agents to fund these transactions by offering lending facilities 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 the purchase of traded livestock (cattle, sheep and lambs) for fattening within the loan term.

Where are loans provided?

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

What are the loan terms?

The maximum term is 12 months. There are no prescribed weight targets that have to be met and no sell by dates.

How are loans evaluated?

SocietyOne's credit team and loan origination system assesses the creditworthiness of livestock agents 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. Each draw down is an individual loan on our system.

What returns will I receive?

The target pre-tax return for the loan portfolio is 6.5%-7.5% p.a. (on a blended basis, taking into account lower earnings on investor's cash interests that are awaiting deployment or distribution) based on an investor rate on loans of 7.75% p.a. after fees but before taxes and losses.

How do I invest?

Please register your interest in becoming an investor in livestock loans online under the "Invest" tab.

Can I choose the loans I invest in?

No. Investors are allocated interest in livestock loans on a fractionalised basis. You are unable to choose which specific livestock loans (e.g. cattle or sheep) you invest in.

What is the security for the Livestock loans?

For all livestock loans, SocietyOne requires the following security:

  • A Purchase Money Security Interest (PMSI)is taken over the livestock. This is registered on the Personal Property Security Register.
  • The first 10% of each loan is funded by the borrowing livestock agent, which is the first portion of the loan to be applied to any losses. There is a a "super priority" security that cover the livestock and/or the proceeds of the sale of the livestock.

In some circumstances, after undertaking a credit assessment of the livestock agent, SocietyOne may require additional security, including:

  • A General Security Agreement over the livestock agent's business, which is also registered on the Personal Property Security Register.
  • Personal guarantees from the director of the livestock agent's business.

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 are moved from a farmer's property or sold, by law, the changes must be registered on the NLIS. 

How are the livestock loans settled?

All livestock buying and selling transactions as well as all monitoring and administrations functions are managed through a centralised settlement office. This also includes all invoice payments when livestock are purchased and loan settlements when livestock are sold.

The settlement office uses its expertise to arrange for completion of documentation, advances funds on receipt of purchase invoices from the sales yards, maintains the required interface with the NLIS and provide signed documentation to SocietyOne.

Is the interest rate fixed or variable?

The interest rate is fixed for the life of the loan. It calculates daily and accrues during the life of the loan.

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. Individual loans have a term of 12 months but may be repaid earlier without penalty.

What happens when the loan is repaid?

Your principal will be returned, and interest earnings credited to you upon repayment (in part or in full) of the loan. You may elect to reinvest the principal component in further loans.

What are SocietyOne AgriLending's fees?

From investors, SocietyOne AgriLending receives a Servicer Fee of up to 3.25% 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.

Borrowers pay an establishment fee of 1% if the loan application is successful and fully funded. This fee is capitalised into the loan and funded by 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 12 months. 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 livestock 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 may pass loans to a collection agency when a borrower is in default. If a borrower does not repay the loan, you may lose your investment in that particular loan.

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