Apprehension over further limits on credit
THE credit squeeze was the biggest worry of farmers at the ploughing championships — but they were warned it could be even worse next year.
IFA president Padraig Walshe said he was inundated by farmers experiencing credit difficulties.
“There is real apprehension among farmers about the winter months ahead, and the potential difficulties in maintaining cash flow and meeting household bills,” said Mr Walshe.
Onerous loan conditions and demands for excessive security lie ahead for farmers who find they need cash flow assistance from the bank next year to tide them over until EU payments start in October, warned Cathy Power, specialist solicitor in commercial law.
One of the Malcomson Law solicitors advising farmers at the ploughing on legal issues, she warned them to them to be on guard against excessive security requirements compared to borrowings, leading to the potential of disastrous foreclosures.
She revealed that the family home, all farm buildings and 50 acres of good land were sought as security by a bank recently from one of her clients seeking a €100,000 loan while awaiting a grant payment.
“I advised the client that he should return to the bank and attempt to vary the level of security and the conditions in the Letter of Offer.
“You will invariably find that your bank will at least negotiate with you on these terms.”
She said the day of attending the bank and handing in your land certificate and receiving money is nearly gone.
“From December 31 next, all loans will be securitised only by way of legal charge — a mortgage on your land.
“The introduction of this legislation has given the banks an opening or opportunity to request and demand further security from you the farmer for your borrowings.” She said there is no accepted or agreed formula, mechanism or ratio to determine security for loans.
“I would see this as a huge problem going forward, and would certainly feel that the IFA have a role to play in approaching and negotiating with the Irish Banking Federation to agree some sort of guideline or stepped approach.”
To obtain better security to loan matches, she suggested splitting folios and excluding buildings or land with development potential, adding that seasonal loans or temporary overdrafts should not generally require legal charges.
She urged farmers encountering hard times to communicate at all times with their bank manager. “If the economic situation continues as it is, I guarantee you that next year banks and lending institutions will have no sympathy for any borrowers, including farmers who cannot meet their repayments.”
