The low-cost agri-loans that had been promised since last year will be available within the next week, to the relief of farmers across the country.
Back in November 2016, we reported that Creed had ‘welcomed’ the agri-loans, and had said that they would be available in early 2017. Luckily, the commitment to have the loans so soon in 2017 was acted upon.
The loans are an important step in the establishment of the “Agri Cashflow Support Loan Scheme”. The Strategic Banking Corporation of Ireland (SBCI), back in 2016, had invited banks and other lenders to take part in the new loan scheme that will make €150 million available to farmers at low-cost interest rates of 2.95%.
IFA Farm Business Chairman, Martin Stapleton has welcomed the delivery of the low-cost agri-cashflow loans, due to be available in banks in the coming week.
Martin Stapleton said, “IFA campaigned strongly throughout 2016 for lower cost credit to be made available to the farming sector, particularly where farms were under short-term cashflow pressures.
“The announcement of the low-cost loan fund was met with a hugely positive response from the farming sector. It is my belief that there will be strong demand for these loans, with farmers using the funding available to restructure their financial commitments and to access low-cost working capital.
“Since the announcement of the loans in the October Budget, IFA has kept the pressure on to ensure that loans were made available in early 2017. Farmers make their financial planning decisions at the start of the year, and it was critical that the loans, at a rate of 2.95%, were available as early as possible.
“I am encouraging farmers to look at the overall structure of their short term financing arrangements and to apply for this low cost finance, if appropriate for their farm enterprise needs.”
According to Creed, this loan scheme forms part of a “three pillar strategy” in response to income volatility.
“Along with tax measures and farm payments, it will alleviate some of the pressures being caused by the current market difficulties including currency fluctuation in the aftermath of the Brexit referendum”.
This scheme will enable farmers to improve the management of their cashflow and reduce the cost of their short-term borrowings. The scheme was developed by the Department of Agriculture, Food and the Marine (DAFM) in partnership with the Strategic Banking Corporation of Ireland (SBCI).
Public funding of €25 million from the Department, which includes €11 million made available under the EU’s exceptional adjustment aid for milk and other livestock farmers and €14million in national funding, provides leverage for the €150 million scheme.
What are these loans for?
According to the Department, this is a cashflow support facility to improve the working capital position of viable primary agriculture SMEs, including farmers. The loans are primarily to pay down expensive forms of credit such as merchant credit and other short-term financing facilities.
The loans may not be used for:
- Refinance of existing term loans
- The refinance of undertakings in financial difficulties (as opposed to cashflow difficulties; this is defined in EU guidelines.)
- New investments.
However, by improving the cashflow position of their business through use of this facility, many farmers will be in a better position to negotiate and restructure existing loan commitments.
Who can apply?
The loans will be available to all livestock farmers, tillage farmers, horticulture producers and others involved in primary agricultural production. To satisfy the requirements of the EU aid package, applicants will also need to satisfy certain eligibility criteria.
What size are the loans and what is the interest rate and terms?
The loans will be for amounts up to €150,000 for up to six years. The interest rate at 2.95% will represent a significant saving for farmers when compared with other forms of finance currently available. The loans will be flexible with interest only facilities of up to three years. Normal lending assessment criteria will apply although the loans will be ‘unsecured’ in nature, thereby facilitating a more straightforward application process.
How much is available and where is the money coming from?
It is planned that a total of €150 million in funding will be available:
- The Department of Agriculture, Food and the Marine will be contributing €25million in total. This includes €11.1 million from the EU’s ‘exceptional adjustment aid for milk and other livestock farmers’ and €14 million in National funding.
- SBCI uses the €25 million to leverage the fund. SBCI with COSME (the EU programme for the Competitiveness of Enterprises and SMEs) is providing the guarantees required to underpin the loan’s flexibility, and lower the cost of the loans.