Kieran Coughlan: Cashflow Loan Scheme launched

The Agriculture Cashflow Support Loan Scheme was launched last week.

The scheme has been in the planning for more than four months, and there is a palpable appetite amongst farmers looking to engage with the scheme.

The relatively cheap interest rate of 2.95%, and the advantage of having unsecured borrowings of up to €150,000, are two huge attractions for farmers.

Typically, farm overdrafts are priced at rates of 9% and more. Interest on merchant credit is typically 1% per month (or over 12% per annum), with some merchants charging up to 2% per month. Unsecured farm development loans are typically priced around 6%.

Of course, farmers who offer security to a financial institution are generally able to access cheaper credit, but there is a cost (in putting such security in place), and additional risk exposure in the event of default.

One disappointing aspect of the new scheme is that the loans are not available to pay off existing loans.

Other main points of the scheme are as follows: 

* Loan terms are from one to six years. 

* Loans available to fund working capital. 

* Loans are available up to a maximum of €150,000 per farm operation. 

* An interest only repayment option may be available at the start of a loan, subject to normal lending criteria. 

* Loans are aimed at the primary agricultural sector.

Interestingly, there are restrictions as to who can apply for the loan — which may prohibit many older and part-time farmers from the scheme, because farmers will be required to declare that they meet one of the following conditions: 

* Are participating in an agri-environment scheme as part of a Rural Development Programme. 

* Or a certified member of a Bord Bia Quality Assurance Scheme, or a Quality Assurance Scheme run by a co-op, processor or producer representative body. 

* Or a member of a Department of Agriculture, Food and the Marine (DAFM) registered Farm Partnership. 

* Or have completed or are participating in the financial management elements of DAFM’s Knowledge Transfer Programme, or previous programmes such as BTAP and STAP, or have a certificate or other proof in relation to financial training from Teagasc or another body relating to eligible agricultural sectors.

Loans cannot be used for new investment or refinancing of existing debt, but can be used for future working capital needs such as buying fertiliser, seeds, feed). 

Loans can be used as an alternative to merchant credit, and to replenish working capital used prior to 31/12/2016.

The three banks approved to administer the scheme are AIB, Bank of Ireland and Ulster Bank. All three have information on the Scheme available on their websites, and all three offer an online application process, or you can download an application form.

The scheme is open for applications until September 30, 2017, or until such time as the funding has been entirely allocated. 

Given the pent-up demand for the scheme, and the relatively low thresholds for approval, it seems plausible that the scheme will be taken up quickly.

Farmers should remember the golden rule, if you can’t afford it, don’t buy it. The temptation of cheap credit can seem like an easy fix, but always be mindful of your ability to meet repayments.

As always, each individual should obtain professional financial advice relevant to their own circumstances.



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