« Back to blog

Farmers could suffer cash shortfall after ‘severe weather bridging loans’

Posted: August 22, 2018

The Scottish Government is offering bridging loans for farmers affected by severe weather conditions,

but Adam Taylor chairman of the Financial Intermediary and Broker Association (FIBA) has warned that farmers could have a cash shortfall when they have to repay the loans.

Farmers have been badly hit by adverse weather conditions. In the spring there were storms, then this was followed by an unusually hot summer. The Scottish Rural Economy Secretary, Fergus Ewing announced that government bridging loans are available worth up to 90% of the annual European Union farmer’s payment. Fergus Ewing said that this would help compensate for the increased feed and fodder costs caused by the severe weather. Without loans, farmers may resort to selling livestock.

Adam Taylor of the FIBA has said the government loans are like those provided by private bridging finance lenders. They provide a much-needed short-term cash injection. According to Adam Taylor what is missing from the Scottish Government scheme is the clear exit strategy of how farmers can afford to repay the loans.

The security for the loan is the European Union payment which can be used to repay the bridging loan. Adam Taylor points out that the European payment is usually needed for other farmer’s expense, so using it to repay the bridging loan could leave farmers short of cash.

Benson Hersch, chief executive of the Association of Short Term Lenders said that the Scottish scheme:

“shows that bridging finance is multi-dimensional.”