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Financial Support

CAP Support

The Common Agricultural Policy (CAP) provides a system of agricultural support and programmes throughout the EU. It is split into two Pillars: Pillar 1 relates to direct support payments, and Pillar 2 supports the Rural Development Programme.

During the most recent CAP reform negotiations, Scotland sought a fair deal for Scotland's farmers, with sufficient flexibility in the system to meet Scotland's diverse farming needs, including arguing successfully to get CAP support for new entrants to farming.

Direct Payments

Direct Payments are intended to provide farmers with a basic level of support in return for the provision of public (environmental) goods.  For the majority, most payments will be made through the Basic Payment Scheme and Greening.  Other farmers, depending on circumstances, will access support through the National Reserve.

The current CAP started in 2015, and unlike before, existing new entrants were eligible for Basic Payment entitlements from the very start.  But also they could apply to the National Reserve to top up the value of their entitlements to the regional average value also from Day 1.  Future new entrants are now also allocated entitlements from the National Reserve.  Top up payments to farmers up to 40 years old, at the time of applying (as set by Europe), are also available.

Scottish Rural Development Programme (SRDP) – Start-up and Business Development Grants

Recognising the importance of generational renewal in the Scottish agricultural sector, the SRDP includes dedicated support grants for young farmer (40 years and younger as set by Europe) new entrants and new entrants regardless of age:

  • Young Farmer Start-up Grant – support of €70,000 per eligible business to support young farmers who have been head of a business for less than 18 months;

  • New Entrants Start-up Grant – support of €15,000 per eligible business to support new entrants to farming of any age of smaller holdings and who have been head of a business for less than 12 months; and

  • New Entrant Capital Grant Support – capital support of up to £25,000 to assist business development projects to all new entrants who started their business in the 5 years preceding application.

If you have a question about CAP payments, or how to apply for them, please contact your local Rural Payments and Inspectorate local office: https://www.ruralpayments.org/publicsite/futures/topics/contact-us/

Alternatively, the Rural Payments and Services:                   https://www.ruralpayments.org/publicsite/futures/topics/all-schemes/new-entrants/  - website contains detailed guidance about all the SRDP new entrant grants.

The document – The new Common Agricultural Policy in Scotland http://www.gov.scot/Resource/0045/00456031.pdf – provides a full introduction and what it means to you.

Banking and Finance

  • The following are banking and financing considerations when planning your business as a new entrant.
  • Set up a business banking account as soon as possible so you can build up a track record and credit history. It may support future credit applications.
  • Preparing a business plan is an important requirement so you can readily articulate your plans, the resources and funding required. The depth of your plan will depend on the scale; complexity and amount of funding required by your business. By displaying the viability of your business in this way you can demonstrate your future affordability of any funding being sought.
  • Funding solutions should match the specific need of the business – i.e. short term working capital such as feed and fertiliser would be suited to overdraft; purchase of machinery to asset finance.
  • Banks may ask for the provision of security over assets for some forms of funding.
  • Where no security is available, participating Banks can introduce the UK Government-backed Enterprise Finance Guarantee (EFG). EFG-backed agricultural funding are usually limited to £100k over 5 years or £50,000 over 10 years as the sector is deemed to receive State Aid through CAP funding. For a worked example and more details please see the attached links.

http://www.fwi.co.uk/business/efg-means-banks-can-say-yes-to-more-farm-loans.htm?amp;category_name=business

http://british-business-bank.co.uk/ourpartners/supporting-business-loans-enterprise-finance-guarantee/

Links to member banks are shown below:

Bank of Scotland

www.CBonline.co.uk

https://www.business.rbs.co.uk/business/startups-and-SME.html

https://www.tsb.co.uk/business/