Farm Ireland

Wednesday 20 February 2019

Farmers face uphill battle to secure credit from the banks

Shane O'Loughlin of the ICMSA
Shane O'Loughlin of the ICMSA
FarmIreland Team

FarmIreland Team

ICMSA has questioned the bona-fides of the banks regarding their willingness to finance farmers through the current fodder crisis.

All the main banks have urged farmers to engage with them now to help finance winter feed needs and other costs associated with the recent drought.

However, Shane O'Loughlin of the ICMSA's farm business committee claimed that farmer requests for overdraft increases were being summarily rejected, or excessive requirements in terms of documentation were being sought for relatively small lending increases.

The farm organisations have warned of a serious debt build up at farm level, particularly on highly-stocked dairy units, as a result of the massive feed bills incurred during the long winter and scorching summer.

But the banks insisted that they have not experienced a major increase in loan applications.

Sean Farrell of Bank of Ireland said the bank had seen more farmer requests for overdraft extensions but had not received what he described as "distress calls" as of yet. However, he said increased farm lending applications were likely from September.

"The first port of call for farmers is the co-op or merchant, but come September-October we'll see more of a requirement [for farmer lending] and we're ready for that," Mr Farrell said.

He said Bank of Ireland had a menu of options for farmers, including an extension of overdraft facilities, short-term stock loans or going interest only on loans for a period.

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Ann-Marie Butler of Ulster Bank told an ICMSA meeting in Mallow last week that farmers needed to do a finance budget to match their fodder budget for the coming winter.

"Act now, look ahead. Do your fodder budget, but equally do your finance budget," she said.

Ms Butler said she appreciated the pressure farmers were under at the moment, but she stressed that financing the winter feed requirement was as important as sourcing that feed.

"What we're finding around the country from an Ulster Bank perspective is that customers are not yet approaching the bank. We're not seeing an increase in overdraft utilisation or we're not seeing people go for additional finance. What I'm hearing from customers is a concern as to where they'll get feed," she explained.

She told farmers that they needed to approach their banks early to put structures in place to finance their on-farm feed requirements for the winter.

Ulster Bank announced a €15m fund last month to alleviate current difficulties in the farm sector. It is open to existing and new farmer customers.

AIB stated that it is aware of the difficulties facing farmers and will deal with loan applications on a case by case basis. Among the options for farmers cited by the bank are overdraft extensions to €60,000 or term loan facilities.

But Mr O'Loughlin said that banks needed to match their public expressions of support for farmers with "concrete actions of support for their customers".

The ICMSA representative called on the banks to provide low-interest lending "to address the working capital deficit on farms", and for lending institutions to streamline their loan application processes.

"The level of documentation being requested in some cases is gone beyond ridiculous," he said.

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