Last week, we gave an Budget 2017 cheap loans: how to get a cashflow boost" target="_blank">overview of the reduced rate loans announced in Budget 2017.

This week, we try to shine some additional light, largely in a vacuum, as the minister for agriculture, the Stategic Banking Corporation of Ireland (SBCI) – who are supporting these low-cost loans – and the banks, have yet to meet to discuss the finer details.

Confidential documents obtained by the Irish Farmers Journal, outline the terms in more detail. In order to be eligible for the scheme, a farmer must satisfy one of the following conditions; be a member of a Bord Bia quality assurance scheme; be part of a Department of Agriculture agri-environmental scheme; be part of a co-op quality assurance scheme; have completed a course with Teagasc; or have completed a financial or farm sustainability training course with a co-op. While only one needs to be satisfied, this may be difficult for some farmers, especially some tillage farmers, and is likely to come under pressure from farm organisations.

According to the documents, the scheme shall not apply to farmers in financial difficulty (excluding short-term cashflow pressures caused by the current market).

The scheme is to operate from January to October 2017.

It is understood that the three main banks, AIB, Bank of Ireland and Ulster Bank will participate and that these loans will be available early in the new year.

Although no date has been confirmed, it is hoped loans will be made available in early January.

Firstly, these loans are termed “cashflow loans” and are designed to allow more flexible working capital at a lower cost than farmers are already paying, specifically through merchant credit or overdraft facilities.

The interest rate of 2.95% is for a maximum of €150,000 with a three-year interest only option. The loan term is six years.

It looks likely that refinancing of more expensive term loans will not be allowed. However, pressure may come from farm organisations to allow farmers swap to these lower-cost loans.

The documents outline clearly the purpose of the loans. They can be used for working capital requirements, to term out cashflow used for farm investment, eg capital investment, purchase of stock/machinery etc and to term out merchant credit.

This means that a farmer who used cash for on-farm investment (buildings or yards) and did not take out a loan will qualify for these loans. It will not be possible to finance land. It is also unlikely the loans will be allowed to swap more expensive finance on machinery to lower-cost options.

Although it is not yet specified, state aid rules may limit the ability to secure these loans directly for stock (animals).

Some of the key criteria in negotiating this will be that it works for everyone. The Government and SBCI will want to ensure that the €150m will get to farmers who need it – across all sectors.

Competitive offerings from co-ops will ensure that banks will need to participate.

These loans will suit farmers who have maxed out credit facilities, for example merchant debt and overdrafts. It will allow individual farmers to convert some of that expensive credit into cheaper options while still maintaining overdraft facilities and utilising merchant credit again.

While awaiting these loans, farmers are best advised to start planning now and seek professional financial advice. The key will be getting swift access to the funding.