Government-backed loans allow farmers to borrow more

Farm businesses can access loans they might not otherwise get with the government’s Enterprise Finance Guarantee (EFG) scheme.

Loans are provided with a 75% guarantee from the government and are available through the main high-street banks and some other lenders.

The arrangements are made through the main lender and the borrower is still liable for repayment of 100% of the loan, which can be used for a wide range of business investments, including employing and retaining staff, investing in new equipment or funding day-to-day running costs

“EFG gives the lender the security needed, and then it just comes down to whether the lender is happy with the business plan and the applicant’s ability to service the loan repayments,” said Simon Rowbottom, an agriculture manager with Lloyds Bank.

See also: Finance scheme helps dairy start-up expand

The guarantee usually takes four to six weeks to set up, as long as the necessary financial information is available.

The premium charged by the Department for Business Innovation and Skills (DBIS) for providing the guarantee is always 2% per annum.

This is calculated and collected quarterly on the reducing balance of the bank loan.

Enterprise Finance Guarantee – how does it work?

• Eligible businesses must have annual turnover lower than £41m
• EFG provides 75% security for loans of £1,000 to £1.2m
• EFG-backed agriculture loans are usually a maximum of £100,000 over five years or £50,000 over 10 years because the sector is deemed to receive state aid through CAP funding
• For UK businesses only
• Borrower pays 2% annual premium direct to government on top of lender’s fees and charges
• Applications should be made through the lender to make sure affordability criteria are met and only security is lacking