10 Things You Didn’t Know About The Land Bank
Land Bank is a specialist agricultural bank guided by a government mandate to provide financial services to the commercial farming sector and to agri-business and to make available new, appropriately designed financial products that would facilitate access to finance by new entrants to agriculture from historically disadvantaged backgrounds. Today, the Bank is a true South African development finance institution that serves all farmers equally.
Land bank offers the following products and services:
1. Long-term mortgages
Long-term mortgage loans are fixed instalment loans for capital expenditure. Clients use these loans for the purchase of land, the purchase and installation of machinery and equipment, fixed asset improvements, water project schemes and other agriculture-related capital expenditure.
Security for such a loan from Land Bank may consist of:
• Mortgage bonds over fixed and movable assets
• Covering bonds over fixed and movable assets
• Cession of debtors
• Cession of unpaid share capital (co-operatives)
• Cession over insurance policies
• Suretyship
Interest and costs
Interest rates and the cost of long-term mortgage loans are determined as follows:
• Interest rates are quoted nominal annual compounded monthly (NACM)
• Interest rates are not fixed and can be adjusted from time to time over the term of the loan, based on fluctuations in the money and capital markets
• There are no transaction costs.
Term
The term of long-term mortgage loans and repayment are as follows:
• Term is negotiable usually between 5 and 15 years
• Repayment is either in annual or monthly instalments. Instalments can be calculated on an actuarial or “straight-line” basis.
2. Medium-term loans
Medium-term loans are loans in the form of cash credit accounts.
Security in favour of Land Bank may consist of:
• Covering bonds over fixed and movable assets
• Notarial bonds over movable assets
• Cession of debtors
• Suretyship
• Cession over insurance policies
• Cession of unpaid share capital (co-operatives)
Typical Use
Over the years our corporate clients have found these medium-term loans invaluable for supplementing working capital.
Interest and costs
Interest rates and the cost of medium-term loans are determined as follows:
• The interest rate is nominal annual compounded monthly (NACM)
• Interest rates are not fixed and may be adjusted from time to time over the term of the loan, based on fluctuations in the money and capital markets.
• Structured repayment conditions apply
• There are no transaction costs.
Term
The term of medium-term loans and repayment is negotiable. They are usually for 3 to 8 years.
3. Short-term loans
These loans meet seasonal finance requirements.
Typical Use
Short-term loans are tailored to meet important financing needs in the agricultural cycle including the provision of advances – against crop intakes, production requirements, production credit and other related services that includes the handling, manufacturing, packing, processing, storage, transport and/or marketing of agricultural products.
Interest and costs
Interest rates are determined as follows:
• Interest rates are quoted nominal annual compounded monthly (NACM)
• Interest rates are not fixed over the term of the loan and can be adjusted from time to time based on fluctuations in the money and capital markets.
• There are no fixed terms of repayment. Draw-downs and repayments are regulated by the value of assets (stock and debtors) financed
• There are no transaction costs.
Term
The term of short-term loans is linked to the season, usually a maximum of 18 months.
4. Deposits
Call deposit accounts are available to corporate clients only.
Typical use
• Deposits provide unlimited withdrawal opportunities
• No minimum deposit lever
• Payment upon notification
Interest and costs
• Interest rates are quoted nominal annual compounded monthly (NACM).
• Interest rates are not fixed and can be adjusted from time to time based on fluctuations in the money and capital markets.
• There are no transaction costs.
Term
No minimum or maximum term applies.
5. Guarantees
Land Bank issues guarantees for the purpose of guaranteeing the meeting and fulfilment of corporate clients’ obligations in connection with their agriculture related activities.
Typical use
Our corporate clients typically use this service for the purposes of agriculture-related activities and insurance premium guarantees.
Interest and costs
Our rates for issuing guarantees are highly competitive. There are no fixed terms and a cancellation clause is negotiable.
6. Establishment loans
Description
Land Bank provides establishment loans to farmers for establishing perennial crops.
These loans are typically used for establishing sugar cane plantations, citrus and deciduous fruit orchards, timber plantations and vineyards for table and wine grapes. An individual farmer or a group or any legal entity may access this type of loan.
Farming enterprises from large scale commercial farms to small-scale farms are currently utilizing establishment loans.
Typical use
• Citrus and deciduous fruits
• Forestry
• Wine and table grapes
• Sugar cane
7. Large Livestock
Land Bank now offers its clients an opportunity to purchase livestock using the latest available animal identification technology.
The product is aimed at clients who:
• Have an established herd of stud animals; or
• Are involved in extensive beef production; or
• Have an established herd of dairy cows;
And who wish to expand their herds, without offering land for security purposes. It can also be used to finance high value game and horses.
This is a medium term loan where the animals bought and the client’s existing animals form the most important security – the animals belong to the Bank until the loan has been repaid.
Clients who have an established herd of animals can offer their existing animals as security to purchase more animals. The animals purchased and those offered for security are micro-chipped for the client. The micro-chip will provide an unique identity for each animal and can be used to identify animals in case of stock theft. The client also obtains access to an online database of their animals that can be customised to suit the client’s specific needs for record-keeping purposes. Land Bank will also finance a scanner for the client’s personal use if the clients wish to include it in the loan.
The micro-chips are completely safe for the animal and humans. It remains in the animal for life and the client can use the technology even after the loan has been repaid. When animals are sold, transfer of ownership can be registered electronically.
8. Instalment finance
Instalment Sale Finance is a type of medium-term loan where the goods that you buy act as the main security for the loan: the goods belong to the Bank until the loan is paid in full. It enables all farmers, especially those with limited assets to grow their businesses.
Typical uses
• Farming equipment
• Implements
• Vehicles
• Livestock
• Certain types of stud livestock
This finance package is available for periods between 3 and 10 years, depending on the expected length of life of the asset. Payments can be made on a monthly, quarterly, six-monthly or annual basis.
An individual farmer or a group or any legal entity may access this type of loan.
Interest
The total amount due plus interest are determined at the time you take out your loan and divided into equal instalments over the loan’s lifespan.
9. Special Mortgage Loan
Who Qualifies
People and groups who: Were previously denied their full rights buy land. Have the potential to become successful farmers. A person whose spouse owns farmland does not qualify. People who own land in towns and cities can get Special Mortgage Bonds. Sons and daughters of people who own farmland can qualify as first time buyers.
Replacement
Currently the special interest rate is set at 10%. This rate is fixed for 24 months with intention of keeping it as low as prevailing market conditions allow. The maximum loan at the special interest rate is R500 000. If you borrow more than R500 000, the interest on the amount over R500 000 will be charged at the standard rate for long-term loans. The loan term is up to 25 years.
10. The Land Bank also offers tenders that seek efficient, effective, economic and uniform procurement of goods and services, while adhering to the Land and Agricultural Development Bank Act, 2002 (“the Act”) and all relevant South African legislation. This includes: Public Finance Management Act, Preferential Procurement Policy Framework Act, National Industrial Participation Programme, Broad-Based Black Economic Empowerment Act (BBBEE Act) and Codes of Good Practice. Our procurement policies adhere to our objective of supporting corporate and professional entities owned by blacks (as defined by the BBBEE Act of 2003) and small and medium enterprises.
To see adverts on tenders offered by the Land Bank see http://www.landbank.co.za/tenders.php
