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Local banks have been inundated with applications from NI farmers for the coronavirus bounce back loan scheme.
Between £2,000 and £50,000 is available to businesses at a fixed interest rate of 2.5%. The loan duration is six years, although there are no repayments or interest in the first 12 months, and no extra charges apply for repaying early.
“Farmers have widely availed of the bounce back loans across all sectors,” said Ulster Bank’s head of agriculture Cormac McKervey.
“They have used it for a variety of reasons, such as to clear merchant credit, to inject it into their current account in case prices get worse, or to invest in repair and maintenance of existing buildings,” he said.
The scheme is also being used by some farmers to pay off hire purchase debt which can commonly involve interest rates of over 10%. Likewise, it is being used to clear overdrafts which can typically come with interest rates of 3-4%.
Meanwhile, some have suggested that the high prices being paid in marts for dairy and beef breeding stock can be partly explained by the existence of the loans.
Administering
Local banks are administering the scheme on behalf of the government and applications have a high approval rate given that there is no credit check on applicants and all loans are government guaranteed.
The loans are capped at 25% of business turnover, up to a maximum of £50,000. Individuals are required to declare their business turnover in the online application, although evidence of this does not need to be submitted.
Despite the low interest rates, the loans still need to be paid back and applicants are being warned not to overstretch themselves financially.
A concern is that some farmers use the scheme to clear existing debt, but then subsequently take on more debt within the next 12 months, before the first repayment is due on the bounce back loan.
The scheme is initially open until 4 November 2020, although the government has said that the application deadline may be extended.
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