Multi-million euro EU loans package could open ‘as early as next month’

Young Irish farmers may be able to avail of the newly announced €1 billion loans package – launched by the European Investment Bank (EIB) and the European Commission – as early as next month, AgriLand has learned.

The package, revealed earlier today, April 29, is aimed at increasing access to funding for EU farmers, with a particular focus on young farmers – a demographic that have consistently suffered higher volumes of loan application rejections than other farm types in recent years.

The EIB – aka the EU bank – has stated that the loans are specifically for financing agriculture and the bio-economy.

The €1 billion sum will be matched by the implementing banks and financial institutions in individual member states – as such, the package will ultimately mobilise close to €2 billion of long-term financing for the sector.

In this package, a €700 million programme loan for agricultural small and medium enterprises will be managed by local banks and leasing companies active across the EU and will include a minimum 10% window for farmers under 41.

The additional €300 million is expected to be approved shortly.

The €1 billion will cover all of the EU countries and the loans will be divided on a “first come, first served” basis.

If there is a lot of uptake, the EIB has stated that there will be the potential to increase the funding in the future.

It is understood that the scheme will enable young farmers to benefit from competitive financing terms – such as longer tenures of up to 15 years and up to five-year grace periods in order to address their specific needs.

According to CEJA, the European Council of Young Farmers, approximately 6.5% of farmers across the EU are under the age of 35.

In Ireland around 6% of the farming demographic consists of young farmers under the age of 35 years – that’s an estimated 7,500 farmers.

The announcement has been broadly welcomed by the country’s farming organisations and the sector’s political representatives.

Irish perspective

From an Irish perspective, a spokesperson for the EIB told AgriLand that: “Irish banks would need to come to us to say ‘we want to participate in this programme’ and then they would get the money from us.

“We’d give them a loan that is going to have a very competitive pricing, so that they can pass on this benefit of pricing to the farmers.

“Young farmers are farmers that will be no more than 41 years old. Any small or medium-sized enterprise or co-operatives active in the agricultural and bio-economy sector will also be eligible for this,” she said.

The spokesperson said there will be “no maximum or minimum limit” on the loan size. Pillar banks will have discretion on this within individual member states.

Each bank will decide on the financing or investment the farmer wants to make.

However, for the banks a limit of up to €100 million in any 12-month period will apply for now.

“We give the banks the money and then the funds are available for 12 months. They have to try to disperse it within one year.

Once the funds are used we can always increase the amount if we see that there is a lot of demand for it.

“We can’t give specific interest rates for the banks, it really depends on a case-by-case basis and the market conditions.

“But we will give good pricing to the banks and to the loans and this will allow them to give a good price to the client,” the spokesperson said.

However, the EIB is looking at incentives that would lead to a reduction on interest rates for young farmers.

We’re not pushing for any type of investment – it can be working capital, it can be investment, it can be for farm succession, biogas facilities, other agricultural fixed assets, these are just examples.

The package offers a streamline approach, so that when banks approach the EIB a loan agreement can be put together at relative speed.

“If it’s a bank that we are used to partnering with, within one or two months the banks will be able to have a contract with us.

It could be as early as next month if someone contacts us today. We have started engagement with some banks, so it could be available in one or two months.

“At the moment we haven’t started talks with Ireland; but that could change tomorrow,” the spokesperson said.

The new loan scheme is said to be one of the largest agriculture financing initiatives backed by the EIB and will be “complemented” by two additional pilot loans: a €75 million loan solely for young farmers; and a €200 million loan for agriculture and climate action.

What is the EIB?

The EIB is the long-term lending institution of the European Union owned by its member states.

It makes long-term finance available for “sound investments” in order to contribute towards EU policy goals.

During the last five years (2014-2018), the EIB has provided €32.8 billion of co-financing to the agriculture/bio-economy sector.

In addition to the loan package, the continued use of the European Agricultural Fund for Rural Development grants for young farmers and start-ups can be used as interest rate subsidies or for technical assistance.

In addition, the EIB and the European Investment Fund will offer advisory support and expertise to managing authorities.

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