The Minister for Agriculture, Food and the Marine, Michael Creed TD, has announced an important step in the establishment of the “Agri Cashflow Support Loan Scheme”. The Strategic Banking Corporation of Ireland (SBCI) has today 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%.
Minister Creed said that ‘since taking up office, one of my priorities has been to address the impact on farmers of the sustained period of lower commodity prices. I am conscious that this has caused cashflow difficulties for farmers in several sectors. This loan scheme forms part of a “three pillar strategy” in response to income volatility, which I announced as part of the recent Budget’.
“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 is being 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.
The Minister concluded, “2016 has been a challenging year for farmers. As well as income volatility, there is a lot of uncertainty regarding the potential impact of Brexit on the Irish agri-food sector. In this context, the scheme will enable farmers to improve their working capital position and provide longer-term financial stability”.
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.
When will these loans be available and from whom?
Following the SBCI “open call” they will select the participating financial institutions, “that are duly authorised to carry out lending activities, according to the applicable legislation, operating in Ireland and lending to the agricultural sector for a minimum of five years”.
It is hoped that loans will be available through the participating financial institutions early in 2017. The Minister has spoken to the main banks and urged them to participate. The loans will need to be allocated by late summer 2017 to comply with the requirements attaching to the EU funding.
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.