Glossary of terms

Commercial debt is debt that has been established upon commercial interest rates, terms and conditions. 

Examples include banking institutions that take formal security and you hold signed loan agreement documents including mortgage or caveat documents of security provided to secure the debt.

Examples of debt that is not considered to be commercial debt include, but are not limited to:

• consumer debt (e.g. home loans; personal loans (for holidays, motor vehicle, medical expenses, home renovations, investment purposes)
• private debt or family debt not provided at arm’s length and at commercial interest rates and terms and conditions
• non-balance sheet loans
• equipment finance facilities
• funding of normal or additional working capital

• debt that was not established upon commercial interest rates, terms and conditions (such as debt established at a concessional interest rate under Commonwealth and state or territory government schemes).

  Learn more about commercial debt.

A farmer must, under normal circumstances, contribute at least 75% of their labour to the farm business.

This means that their main employment (at least 75% of it) should be from their farm business.

A Deed of Priority (DOP) is a legal agreement between lenders, outlining how they will share the use of security in support of a loan and the allocation of proceeds from sale of security in the event of borrower default.

The agreement will detail the order and amount of proceeds each lender is to receive in the event of default, their rights, and list details of the security owner(s) and title particulars.

A farmer must, under normal circumstances, derive at least 50% of their income from their farm business.

This means that at least half of the money received from employment is from your farm business.

A drought management plan is a document that lists the strategies and activities you will undertake to prepare for, manage through, and recover from drought. 

Some examples of drought preparedness activities include:

• Water management measures and improving water storage capacity
• Stock management strategies
• Reduction or agistment of stock
• Accumulation of feed reserves for stock or sale 

A farm business is a business that derives the majority of its income from primary production within the agricultural, horticultural, pastoral, beekeeping (apicultural) or aquacultural industries. 

Check the eligible industries and exceptions for a RIC loan. 

A farm business is considered financially viable when the business generates sufficient net profit after expenses to:  

• service borrowings at commercial interest rates 
• provide an adequate standard of living for relevant members of the farm business. 

Learn more about financial viability.

Loan security is often called collateral. It is an asset you own that is pledged as protection in case you default on loan repayments, not paying some or all back.

RIC requires applicants provide security that is one or a combination of: 

• a registered mortgage over land or other assets satisfactory to the RIC  
• any other security that we consider necessary. 

These are things you own that are not essential to the effective running of the farm business.

Includes land or property, residential homes (not used as the primary place of residence), or other businesses.

A primary producer is someone whose farm business is involved within the agricultural, horticultural, pastoral, beekeeping (apicultural) or aquacultural industries.

Your farm business should earn the majority of its income from these primary production activities and undertake them all wholly within Australia.

Check the eligible industries and exceptions for a RIC loan.

Relevant on-farm or equivalent experience can include managing a farm business, completing formal qualifications in farming and primary production, or experience working closely with the manager of a farm business.

Significant financial impact is an event outside of your control that has reduced the profitability of your business.    

Examples of evidence to support a significant financial impact on the farm business may include documents demonstrating:  

• large reductions in net cash flow  
• large reductions in production or yields  
• large reductions in operating margins (the percentage margin of farm receipts over farm operating expenses)  
• large increases in operating expenses
• large reductions in livestock numbers through forced sales or losses

Learn more about significant financial impact.

A sole owner is a single and only owner of a farm business. 

Controlling interest means that a person owns more than 50% of a farm business giving them the deciding voice among shareholders and a control over the entity.

A Statement of Position (SoP) is a signed and dated statement by a borrower at a particular point in time, which outlines assets and their corresponding value as well as liabilities and the corresponding amounts owing.

Examples of assets include properties, shares, cash, other investments, receivables/creditors, plant and equipment, livestock, and net assets held in other businesses.

Examples of liabilities include corresponding mortgages, unsecured loans, credit cards, payables/creditors, equipment loans and livestock loans.

Separate Statements of Position may be sought from corporate, individual entities, security providers or guarantors.

Succession planning is the development of a plan that allows the smooth transition of the management of a farm and the farm assets from the one generation to the next.

YIYO is a cash flow budget or summary of your farm business’ performance.

It is a season-by-season summary that includes yields, prices, costs for each season of farming as well as your long- term averages.

It can be as simple as an excel spreadsheet or you can use agricultural-specific software programs.

RIC Agri Lending Specialists will assess your loan application based on criteria set out in our guidelines.

Get in touch if you have a question about the meaning of words or terms we use at the RIC.