With improving milk prices, agri-managers for the main banks are reassuring dairy farmers who required additional borrowings during the past two years, that they will not be forced to start repaying debts if their business is not yet in a position to do so.
Speaking to the Irish Farmers Journal, several agri-managers indicated that they do not have a set milk price that automatically triggers a higher rate of repayment on additional borrowings.
Instead, where farmers still have existing agreements in place, such as a six-month or 12-month period of interest-only repayments, or a short-term freeze on capital repayments, these agreements will still be honoured.
The only exception to this agreement is where a farmer is applying for grant aid on a new capital expenditure project under Tier 2 of the Farm Business Investment Scheme.
Under banking policy, a new borrowing arrangement cannot be taken out by a business if existing loans are not being serviced with capital and interest repayments.
Pro-active
Indications are that numerous dairy farmers are being proactive and approaching their lending institution, looking to start paying off some of the additional debt incurred during the past two years.
Others are discussing their options during the annual review with their bank. Each farm is treated on a case-by-case scenario based on the current financial position of the farm, the monthly income and a cashflow projection for the next 12 months.
For farmers with smaller levels of debt, there is a strong prospect that they will trade their way out of debt this year, provided dairy markets do not drop below current prices.
For others, overdrafts are being reduced by moving a large part of the existing debt on to a short-term loan of two to three years.
Price volatility
With price volatility expected to remain a factor in global dairy markets, agri managers with the main banks have been encouraging customers to make some effort to start repaying existing additional borrowings.
This will put farmers in a stronger position to borrow again, should there be another market downturn in the coming years.
Since late 2014 when dairy markets started to slump, additional farm borrowings have increased by £87m in Northern Ireland. Total agricultural borrowings stood at £1.018bn by July 2016.
While other sectors have contributed to this figure, the majority of this extra lending has been in the dairy sector.
The borrowings outlined exclude merchant credit and asset finance, or hire purchase arrangements.
Click here for milk league tables and analysis.
With improving milk prices, agri-managers for the main banks are reassuring dairy farmers who required additional borrowings during the past two years, that they will not be forced to start repaying debts if their business is not yet in a position to do so.
Speaking to the Irish Farmers Journal, several agri-managers indicated that they do not have a set milk price that automatically triggers a higher rate of repayment on additional borrowings.
Instead, where farmers still have existing agreements in place, such as a six-month or 12-month period of interest-only repayments, or a short-term freeze on capital repayments, these agreements will still be honoured.
The only exception to this agreement is where a farmer is applying for grant aid on a new capital expenditure project under Tier 2 of the Farm Business Investment Scheme.
Under banking policy, a new borrowing arrangement cannot be taken out by a business if existing loans are not being serviced with capital and interest repayments.
Pro-active
Indications are that numerous dairy farmers are being proactive and approaching their lending institution, looking to start paying off some of the additional debt incurred during the past two years.
Others are discussing their options during the annual review with their bank. Each farm is treated on a case-by-case scenario based on the current financial position of the farm, the monthly income and a cashflow projection for the next 12 months.
For farmers with smaller levels of debt, there is a strong prospect that they will trade their way out of debt this year, provided dairy markets do not drop below current prices.
For others, overdrafts are being reduced by moving a large part of the existing debt on to a short-term loan of two to three years.
Price volatility
With price volatility expected to remain a factor in global dairy markets, agri managers with the main banks have been encouraging customers to make some effort to start repaying existing additional borrowings.
This will put farmers in a stronger position to borrow again, should there be another market downturn in the coming years.
Since late 2014 when dairy markets started to slump, additional farm borrowings have increased by £87m in Northern Ireland. Total agricultural borrowings stood at £1.018bn by July 2016.
While other sectors have contributed to this figure, the majority of this extra lending has been in the dairy sector.
The borrowings outlined exclude merchant credit and asset finance, or hire purchase arrangements.
Click here for milk league tables and analysis.
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