The Regional Investment Corporation's variable rate loans will drop 47 basis points, from 3.58 per cent to 3.11pc across its suite of farm business from August 1.
"Smart farmers are finding it hard to turn away from the savings and opportunity our loans present," RIC chief executive Bruce King said.
"If you haven't considered our finance before now, I encourage you to call us - or speak to your accountant - and have a chat about your business and the plans you have for the future."
Drought and Rural Finance Minister David Littleproud welcomed the RIC's rate cut, which he said put pressure on private lenders.
"The RIC's average rate is 2 per cent lower than the commercial lenders. On a $500,000 loan, that's a saving of around $10,000 a year," Mr Littleproud said.
"The RIC is seriously helping farmers in hardship, farmers in drought, and farmers who want to build dams.
"Those are real farmers getting real help. I'm so glad the RIC is delivering and helping farmers.
"I'm also excited the RIC is providing a real and cheaper alternative to major banks and bringing more competitive tension to the market."
The RIC has been operation since July 2018. In the past year it approved 172 loans to the value of about $166 million.
The Regional Investment Corporation provides finance for farmers to modernise and diversify their business.
RIC's variable interest rate is linked to the 10-year bond rate and is reviewed twice a year. It's set at a level that covers the cost to the government of raising the capital for the loans and our operating costs.
For more information visit ric.gov.au or call 1800 875 675