Low-cost Loan Scheme Grants €150m for Farmers
The Department of Agriculture has partnered with the Strategic Banking Corporation of Ireland (SBCI) to launch a low interest loan designed to ease financial burdens for farmers.
Announced during this year’s budget, the loan has an attractive interest rate of 2.95%.
Don’t mistake this for a farming free-for-all, though. The loan has been created for several distinct purposes, and also comes loaded with caveats on what the money can’t be spent on. For instance, loans taken out by farmers can’t be used on new investments or refinancing existing loans. There will also be a limit on the amount available to each participant, with a maximum of €150,000 available over the course of six years.
That’s because the scheme has a very specific purpose, aimed at alleviating financial pressures in the short-term. According to an SBCI spokesman:
‘The loans will enable farmers to plan and budget more effectively by providing an attractive cash flow support loan product as an alternative to more expensive forms of credit such as merchant credit and bank overdraft facilities. The loans are unsecured. The guarantee provided by the SBCI is to the lending institution, not to the borrower.’
News of the scheme’s implementation was hailed by Martin Stapleton, chairman of the IFA farm business committee, who said the announcement was ‘met with a hugely positive response from the farming sector.’
Stapleton added: ‘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 were available as early as possible.’
There were some concerns raised, however, by those in the farming community who wonder whether these low-cost loans will benefit all those who really need it. In fact, the chairman of the ICSA Rural Development, Seamus Sherlock, claims the plan doesn’t go far enough.
‘Low interest loans are, in principle, a good idea, low cost interest is better than high cost interest, so we’re in favour of that. But we are concerned that some of the people that need the money most will be the least likely to get it,’ he said. ‘We’d like to see it being possible to use it to refinance term loans at lower interest rates for people that are stuck in high interest rate term loans.’
Chief among the complaints is the strict limitation on what cash from the loan can be spent on, with John Comer, ICMSA President, declaring that it’s oversight to disallow purchase of farmland and properties.
‘We accept that relatively little land is bought or sold, but it’s always necessary for dairy farmers to consider their total milk platform if expansion is being considered and, to that end, in special circumstances, SBCI should consider loans to purchase land. Farmland is not a speculative asset because it’s actually a tool by which farmers earn their income.’
The low-cost loan scheme will be made available to farmers via the Bank of Ireland, AIB and Ulster Bank.
Article by LoansIreland.ie – Ireland’s number 1 loan comparison website.