The European Investment Bank (EIB)

Farmers who are looking to invest in new buildings, machinery, or equipment should be aware that there are currently funds available from the European Investment Bank (EIB) which are aimed at helping investment in small and medium sized enterprises (SMEs).

SMEs are defined as businesses which employ less than 250 staff and so this covers most farmers. The size of the loan can be anything from £25,500 up to about £11m and so this should cover most levels of borrowing.

The funds, which can be accessed via high street banks or organisations such as the Agricultural Mortgage Corporation (AMC) reduce the borrowing rate by about 0.8% for loans of between 2 and 10 years and 0.6% for loans between 11 and 25 years. These discounts are available throughout the lifetime of the loan which on a £100,000 loan over 10 years would save the borrower about £4000 which is not to be sneezed at.

However, it must be understood the funds cannot be used for all types of borrowing and care is needed to identify whether the proposed investment qualifies. For instance the purchase of land or the refinancing of existing debt, which are two common reasons for borrowing money, does not qualify.

The EIB is EU’s long-term lending institution which is owned and financed by the Member States. It was established way back in 1958 under the Treaty of Rome and is there to support the EU’s priority objectives and in this instance funds are available to support investment being made by SMEs.

Farmers intending to stay in the industry for the long haul also heard from other specialists, Pat Tomlinson, associate director at Old Mill, and Mike Butler, head of rural services at Old Mill both of whom gave excellent speeches.

Pat, who was until recently head of the agricultural team at HSBC gave an excellent insight in to the banking sector and explained the importance of presenting one’s case to the banks very carefully because although they have money to lend they are looking at all applications for loans very carefully.

Mike then went on to examine various taxation issues and in particular the advantages of a corporate structure as compared to being a sole trader or partnership where one cannot take advantage of the comparatively low rates of corporation tax.

The amount of money being made available by the EIB is limited and it is likely this fund will run out soon. Therefore any farmer who is contemplating making a capital investment which will involve borrowing money is urged to make contact with their local Carter Jonas AMC agent or the author of this blog, James Stephen who will be able to put you in touch with the appropriate member if staff.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk