Banks refusing to finance expansion of farms still in red
Farmers attempting to finance farm expansion through further unsustainable debt are among the small businesses being refused credit by banks, according to the Credit Review Office (CRO).
Agricultural contractors working on goodwill instead of collecting debts owed to them are also being refused finance, John Trethowan of the CRO claimed.
"Farms carrying a lot of historical debt are trying to finance expansion through more debt," said Mr Trethowen. "But unless they can prove they can cope with the additional debt, they will be turned down."
However, the credit reviewer added that few farmers had featured among the businesses turning to the CRO for help in obtaining credit.
"Of the ones we have seen, they tend to have insufficient capital on the farm or not enough cash to meet repayments," he said.
In his latest report, Mr Trethowen observed that the two pillar banks (AIB and Bank of Ireland) were largely supportive of medium and low-risk lending proposals from well-established small and medium-sized enterprises and farms that already banked with them.
However, he added he was disappointed that there was not more evidence of support for "risk-taking" on new enterprises and increased lending from the banks.
From a point where banks were lending money too freely in the past, Mr Trethowen believes they are now being overly cautious.