Investing - SocietyOne AgriLending

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 through offering lending facilities to livestock agents to help them fund farmers' livestock purchases.

Livestock agents may only use the loan to fund the purchase of traded livestock (such as cattle and sheep) for fattening by their clients within the loan term.

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

The maximum term for cattle, sheep and lambs is 12 months. The loans are repaid, on average, within 9 months.

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.

Investors currently receive 8.75% p.a. as a gross return on each loan (after deduction of SocietyOne’s Servicer Fee) Interest accrues and compounds monthly. The expected average annualised default rate is 0.0% - 1.0% p.a., which will provide a target return on the loan portfolio of 7.75% - 8.75% p.a.

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 an investment mandate. SocietyOne takes care of the rest. We bid for loans on your behalf in accordance with your choices.

Please register you interest in becoming an Investor in Livestock Loans online under the “invest” tab.

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

Four types of security are included as required by the credit assessment of each agent:

• A Purchase Money Security Interest (PMSI) 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
• Guarantees from the directors of the livestock agents
• Investors capital is paid in priority to the livestock agents 10% share of the loan.

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. 

SocietyOne AgriLending 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 AgriLending.

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

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 within 9 months.

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

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. 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.

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; however, historically loans are repaid within 6 to 9 months.

Major risks include a shortfall upon sale of the secured livestock due to lower market prices that 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 the 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 Information Memorandum in detail and in particular the section on risks.

SocietyOne adheres to strict credit control protocols and will pass loans to a collection agency when a borrower is in default. If a borrower does not repay the loan, investors will lose their investment in that loan unless funds are received in the recovery process.