Agriculture Investment Loan Scheme

A scheme to provide discounted loans and credit facilities to agricultural SMEs in Ireland

1. Objective of Scheme

The objective of this scheme is to provide investment aid in the form of discounted loans and credit facilities to SMEs involved in the agricultural sector. Funding for the Scheme will be provided by the Strategic Banking Corporation of Ireland (“SBCI”) through third party banks and credit institutions (“on-lenders”).

2. Legal Basis and Rules

The operation of this scheme is subject to the provisions of Commission Regulation (EU) No 702/2014 of 25 June 20141 and in particular Chapter III, Section 1 (Articles 14 and 17)(the “Regulation”)and the enabling legislation of the Strategic Banking Corporation of Ireland (“SBCI”) the Strategic Corporation of Ireland Act 2014, as may be amended from time to time). Unless otherwise stated, terms defined in the Regulation shall have the same meaning in this Scheme.

1 Commission Regulation (EU) No 702/2014 of 25 June 2014 declaring certain categories of aid in the agricultural and forestry sectors and in rural areas compatible with the internal market in application of Articles 107 and 108 of the Treaty on the Functioning of the European Union.

3. Budget

The average annual budget of this Scheme shall not exceed EUR 150 million.

4. Who can apply?

Loan applicants must be micro, small and medium sized enterprises (“SMEs”) as defined in in Commission Recommendation 2003/361/EC2.

Loan applicants must be active in the agricultural sector, namely primary agricultural production, the processing of agricultural products or the marketing of agricultural products.

Loan applicants will be eligible to apply for loans once the project concerned meets the criteria set out below. The right to apply does not impose any obligation on an on-lending institution to provide funding to an applicant.

2Commission Recommendation 2003/361/EC concerning the definition of micro, small and medium-sized enterprises (OJ L 124, 20.5.2003, p. 36).

5. Scope of Scheme

Loans may be advanced to support investments in tangible assets or intangible assets on agricultural holdings linked to primary agricultural production or in connection with the processing of agricultural products and the marketing of agricultural products.

Where the loan is to support investments in tangible assets or intangible assets on agricultural holdings linked to primary agricultural production, the investment should pursue at least one of the following objectives:

  1. The improvement of the overall performance and sustainability of the agricultural holding, in particular through a reduction of production costs or the improvement and re-deployment of production
  2. The improvement of the natural environment, hygiene conditions or animal welfare standards, provided that the investment concerned goes beyond EU standards in force;
  3. The creation and improvement of infrastructure related to the development, adaptation and modernisation of agriculture, including access to farm land, land consolidation and improvement, the supply and saving of energy and water;
  4. The achievement of agri-environmental-climate objectives, including the biodiversity conversation status of species and habitat as well as enhancing the public amenity value of a Natura 2000 area or other high nature value systems, defined in the national or regional rural development programmes of Ireland, as long as investments are non-productive; and
  5. the restoration of production potential damaged by natural disasters, adverse climatic events which can be assimilated to natural disasters, animal diseases and plant pests and the prevention of damages caused by those events.

Investments shall be in conformity with EU legislation and with Irish law on environmental protection under the Protection of the Environment Act 2003. For investment requiring an environmental impact assessment under Directive 2011/92/EU the aid shall be subject to the condition that such assessment shall have been carried out and the development consent shall have been granted for the investment project concerned before the date of granting the individual aid.

This Scheme shall not apply to the following:-

  1. Loans to support export related activities towards third countries or other EU Member States, namely aid directly linked to the quantities exported, to the establishment and operation of a distribution network or to the other current expenditure linked to export activity;
  2. Loans contingent upon the use of domestic over imported goods;
  3. Loans to support investments required to comply with EU standards in force.
  4. Loans to an undertaking which is subject to an outstanding recovery order following a previous Commission Decision declaring an aid illegal and incompatible with the internal market;
  5. Loans to undertakings in difficulty;
  6. Loans to support the purchase of production rights, payment entitlements and annual plants;
  7. Loans to support the planting of annual plants;
  8. Loans to support drainage works; and
  9. Loans to support the purchase of animals.

Investments which are linked to the production on farm-level of biofuels or energy from renewable sources are permitted provided production is limited to the average annual consumption of fuel or energy of the farm. Investments in installations, the primary purpose of which is energy production from biomass, shall not be eligible unless a minimum percentage of heat energy is utilised. Investments in connection with the production of food based biofuels are ineligible.

6. Maximum Amounts payable under the Scheme

The maximum amounts of aid that may be generated through the form of discounted interest rates on loans supporting investment under the Scheme are:

  1. €500,000 per undertaking per investment project on agricultural holdings linked to primary agricultural production.
  2. €7.5 million per undertaking per investment project in connection with the processing of agricultural products and the marketing of agricultural products.

These limits shall not be circumvented by artificially splitting up an aid project.

7. Transparency of Aid

Only transparent forms of aid (i.e. in which it is possible to calculate precisely the gross grant equivalent as a percentage of eligible expenditure ex ante without need to undertake a risk assessment) may be provided under this Scheme.

8. Incentive Effect

This Scheme shall apply only to aid which has an incentive effect.

Aid shall be considered to have an incentive effect if the beneficiary has submitted a written loan application for the aid to the SBCI or its on-lenders / agents before work on the project or activity starts. The loan application shall contain at least the following information:

  1. undertaking’s name and size;
  2. description of the project, including its start and end dates;
  3. location of the project;
  4. list of project costs;
  5. declaration of any other Aid obtained for the specific project.

If work begins before the applicant has submitted a written application to the relevant development agency the whole project will be ineligible for aid.

9. Eligible Costs and Aid intensity

The aid shall cover the following eligible costs:

  1. the construction, acquisition, including leasing, or improvement of immovable property, with land only being eligible to an extent not exceeding 10 % of total eligible costs of the operation concerned;
  2. the purchase or lease purchase of machinery and equipment up to the market value of the asset;
  3. general costs linked to expenditure referred to in points (a) and (b), such as architect, engineer and consultation fees, fees relating to advice on environmental and economic sustainability, including feasibility studies; feasibility studies shall remain eligible expenditure even where, based on their results, no expenditure under in points (a) and (b) is incurred;
  4. acquisition or development of computer software and acquisitions of patents, licenses, copyrights, trademarks.

Costs, other than those referred to in paragraph (a) and (b), connected with leasing contracts, such as lessor’s margin, interest refinancing costs, overheads and insurance charges shall not be considered to be eligible costs.

Working capital shall not be considered to be an eligible cost. VAT shall not be considered an eligible cost(except where it is non-recoverable under Irish law).

The aid intensity or total Aid resulting from the loan shall not exceed 40 % of the amount of the eligible costs.

For the purposes of calculating aid intensity and eligible costs under this Scheme, all figures used shall be taken before any deduction of tax or other charge. The eligible costs shall be supported by documentary evidence which shall be clear, specific and contemporary.

Aid provided in the form of a discounted loan shall be discounted to its value at the moment it is granted. The eligible costs shall be discounted to their value at the moment the aid is granted. The interest rate to be used for discounting purposes shall be the discount rate applicable at the moment the aid is granted.

10. Cumulation

Aid under this Scheme shall not be cumulated with any de minimis aid in respect of the same eligible costs if such cumulation would result in an aid intensity exceeding those laid down in the Regulation.

11. Publication and Information

The information referred to in Appendix 1 to this Scheme will be published on the Strategic Banking Corporation of Ireland’s State Aid Website on each individual aid award where they exceed the following:

  1. €60,000 for beneficiaries active in the primary agricultural production;
  2. €500,000 for beneficiaries active in the sectors of the processing of agricultural products and the marketing of agricultural products.
12. Period of Validity

This scheme shall operate from 27 January 2015 until 31 December 2020.

Appendix 1 – Information to be published for Aid awards exceeding the relevant thresholds.

Information shall be published in a spread sheet data format, which allows data to be searched, extracted and easily published on the Internet, such as CSV or XML format. Access to the State aid website shall be allowed to any interested party without restrictions. No prior user registration shall be required to access the State aid website.

The following information on individual aid award shall be published:

  1. Reference of the identification number of the aid;
  2. Name of the beneficiary;
  3. Type of enterprise (SME/large) at the date of granting the aid;
  4. Region in which the beneficiary is located, at NUTS level II;
  5. Sector of activity at NACE group level;
  6. Aid element, expressed as full amount in national currency;
  7. Aid instrument – Interest rate subsidy
  8. Date of granting the aid;
  9. Objective of the aid – investment.
  10. Granting authority – SBCI