Cheap finance will be made available to farmers under the Covid-19 Credit Guarantee Scheme which was launched today.
While exact details on the interest rates available under the package have not been outlined, it is understood that that they could be as low as 3.0-3.5pc.
This is 5-7pc lower than the current bank overdraft or short-term loan rates, which are at 9-10pc and 7-8pc respectively. This equates to a saving of €5,000-7,000 in interest charges in the first year on a €100,000 loan.
Loans of between €10,000 and €1 million will be made available to businesses under the €2 billion package, which is designed to address the economic impact of the pandemic.
The farm sector qualifies for the cheap funding available under the loan scheme, unlike previous initiatives, with farmers required to show that projected turnover had been reduced by 15pc as a result of Covid-19.
The €2 billion in finance is being made available through the Strategic Banking Corporation of Ireland (SBCI). The main commercial banks administer the loans, with the State guaranteeing 80pc of any loan provided by a lender.
While farmers will have to show that their business has been adversely affected by Covid-19, banking sources have indicated that this should not be a very hurdle to jump. One bank official suggested that the reduced tonnages of malting barley accepted by malt companies this year because of the sharp fall in traditional drink sales should qualify affected tillage farmers for the cheap loans. Similarly, a case could justifiably be made for livestock farmers given that returns from beef took a hit earlier this year.
The low loan rates were welcomed by ICMSA’s Shane O’Loughlin.
“The availability of competitively priced finance is absolutely essential for the farming sector,” he said.
“ICMSA has consistently highlighted the high interest rates being paid by Irish farmers relative to their EU counterparts.
“Certainly the rates being talked about under the Covid-19 Credit Guarantee Scheme are an improvement,” he said.
“An important consideration that needs to be considered is to allow farmers and other businesses to refinance existing loans that are being charged above the SBCI levels, and such a move would drive real competition within the banking sector.”
The closing date for applications is December 31.