Agricultural accountant Kieran Coughlan examines the finer print of the two new government-backed loan schemes available to farmers and rural businesses.
Two new loan schemes, which will be of huge interest to farmers and rural-based businesses, have been announced by the Strategic Banking Corporation of Ireland (SCBI) over the past fortnight.
The schemes are to be rolled out to main street lenders as per previous iterations.
The two schemes – a Covid-19 Loan Scheme and a SBCI Energy Efficiency Loan Scheme – offer low-cost finance, with unsecured options available for both loan schemes.
Covid-19 Loan Scheme
Firstly, the Covid-19 Loan Scheme replaces the now closed previous iteration, Covid-19 Credit Guarantee Scheme (CCGS), and offers facilities lending of between €25,000 and up to €1,500,000, with terms of one to six years and unsecured up to €500,000.
Funding can be obtained for working capital, investment and to partially refinance previous such expenditures.
“To be eligible for this particular loan scheme the business turnover or profit must be negatively impacted by the Covid-19 pandemic by at least 15%. Some specific exclusions apply, such as the purchase of property”.
The interest rates are highly competitive, especially in respect of unsecured borrowing which usually carries a risk premium.
Typically, unsecured borrowing sourced directly from banks can carry interest rates of close up to and even exceeding 10%, whereas unsecured funding obtained from a bank, in conjunction with approval through the SCBI, can carry rates of less than 4%.
Note the rates for such loans are variable rates and given that the interest rate environment is set to get heated over the short term it is plausible that variable rates applicable to these schemes will also face some hikes.
Loans are available until December 31, 2022, or until the scheme has been fully subscribed.
Energy Efficiency Loan Scheme
The second scheme announced by the SBCI is a €150m Energy Efficiency Loan Scheme to help SMEs and farmers cut their energy bills and reduce their carbon emissions by investing in energy-saving measures.
“The purpose of the scheme is to offer discounted term loans, asset finance and hire purchases to SMEs and farmers planning investments in a range of energy-saving equipment including solar panels, heat pumps, LED lighting and other energy-saving technology”.
As with the Covid-19 Loan Scheme, interest rates will start out as low as 4% with finance amounts ranging from €10,000 to €150,000 over terms of up to 10 years.
The new scheme is available through Bank of Ireland immediately, with multiple other on-lenders due to follow in the coming weeks.
The SBCI in launching the scheme highlighted that the fund will support the Government’s wider plans to accelerate Ireland’s transition to a net-zero economy and it will enhance the sustainability of participating SMEs and farming businesses.
Minister for Finance, Paschal Donohoe, in launching the scheme, said: “Businesses using the Energy Efficiency Loan Scheme can enhance their competitiveness, address their energy costs and boost their reputation in meeting customers’ sustainability expectations. I urge businesses to exploit the new investment opportunities this creates.”
To be eligible for finance the energy efficiency equipment must be listed on the Sustainable Energy Authority of Ireland (SEAI) ‘Triple E Register for Products’ – a list of energy efficiency products that all meet a minimum set of energy efficiency criteria.
The scheme will operate until fully subscribed with a cut-off date of December 31, 2023. Further information on both schemes is available from the SBCO and lending partners.
(Source – Irish Examiner – Farming – Kieran Coughlan – 19/07/2022)