Agriculture - Government-backed loans: research

i) Case Studies

UK case studies

In recent decades, there have been no UK Government or Scottish Government-backed loan schemes specifically for the agricultural sector^[17]. Part II of the Agricultural Credits Act 1928: Agricultural Short-term Credits, applied to England and Wales and set out provisions for farmers to create a charge in favour of a bank on all farming stock, where applicable, and other agricultural assets (but not land). This agricultural charge acted as security for bank loans to farmers. If the farmer defaulted on a loan, it enabled the bank to recover its lending from the agricultural assets^[18].

In the 1960s, a framework for grants to be provided to persons acting as guarantors for expenses that they incurred when providing security for loans for agricultural or horticultural businesses was set out in section 64 of the Agriculture Act 1967^[19]. A 1984 Parliamentary Debate of the Agriculture (Amendment) Bill^[20] included details of guarantees provided to date at that point which totalled 927 loans (53 defaulted), covering a value of £16 million, and grant payments of £500,000 made. Administration of the scheme was carried out by the Agricultural Credit Corporation, which charged an annual fee of 2.5% on guaranteed sums. Since the 1980s, there have been a number of sector-agnostic government-backed loan schemes that farmers (including young farmers and new entrants) have been eligible to apply for, although uptake from agricultural businesses has been low compared with other sectors.

Appendix 1 details a comparison of government-backed loan schemes in the UK and in European countries with information on dates of their operation, target group, scheme purpose, loan amount, term, guarantee as a percentage, lender role and evaluation of the scheme impacts and uptake levels. UK government-backed loan schemes include the Small Firms Loan Guarantee Scheme (1981 – 2009), Enterprise Finance Guarantee Scheme (2009 – 2020), Recovery Loan Schemes (2021 – 2024) and the Growth Guarantee Scheme (2024 – present). Government-backed guarantees for these schemes ranged from 70% - 80%, with loans for SMEs ranging from £25,001 to £2 million, although lending caps were included in schemes for businesses operating in primary production agriculture.

Additional options currently available to Scottish businesses seeking finance include Scottish Enterprise’s Scottish Loan Scheme^[21], open to Scottish businesses in all sectors and providing loans of between £250,000 and £2 million for terms between 1 and 7 years. To be eligible, businesses need to have a credible business plan, evidence that they have approached other funders in addition to two years of trading history and turnover of a minimum £250,000. These terms could prove challenging for some farm types in Scotland and particularly new entrants establishing their businesses (which lack the trading history or turnover levels).

Start Up Loans from the British Business Bank are personal loans for business start-ups or the development of newly established existing businesses (less than 3 years old). Loans range from £500 - £25,000 with a fixed interest rate of 6% per annum and terms of 1 to 5 years. 12 months of free mentoring is also offered^[22]. Research published in 2022 has shown the agriculture, forestry and fishing sector having the lowest default rates of all sectors for Start Up Loans (Cowling & Dvouletý, 2022)^[23]. However, terms of 1 to 5 years and a maximum loan value of £25,000 are likely to have limited appeal to agricultural businesses where rates of return are low and capital, including land prices are high.

The Scottish EDGE business funding competition also provides grants and a combination of a grant and a loan to Scottish businesses via competition rounds. ‘Innovative, high growth’ potential businesses are invited to apply for up to £100,000 with grant and loan splits of 30/70 or 70/30, depending on the awards^[24].

Table 1 provides a comparison of the British Business Bank and European Investment Bank’s priorities, how these relate to the agricultural sector and support for young farmers. The EIB has seen strong levels of uptake for its loan schemes which include tailoring towards young farmers, whilst uptake for loan schemes facilitated by the British Business Bank have also supported around 170 businesses through the ENABLE guarantee with Oxbury. There is, however, limited publicly available evidence on additionality for both UK and EU schemes, which predominantly use financial intermediaries.

Table 1: European Investment Bank and British Business Bank priorities and measures for facilitating young farmer access to finance

Organisation’s priorities for the agriculture sector

British Business Bank:

Supporting agricultural businesses as part of overall focus on SME support to promote economic growth and journey to net zero in the UK.

European Investment Bank:

Provides financing for investments that help to meet EU policy objectives. Facilitating farmer, micro-enterprise and small business access to finance; Sustainable and efficient food production; agricultural practices and technologies that are innovative and sustainable^[25].

Tailored finance for young farmers

British Business Bank:

No specific focus/loan schemes for young farmers.

European Investment Bank:

€1 billion 2019 loans package from the EIB with a minimum of 10% allocated to young farmers. Financial intermediaries also matched the €1 billion to give a total €2 billion loan package. €3 billion loans announced for the sector in 2024 targeted towards young farmers, female farmers and sustainable farming practices^[26].

Role of Intermediaries

British Business Bank:

British Business Bank ENABLE guarantee - government backed guarantee lending to small businesses, ^[27] lenders include Oxbury, Rural Asset Finance.

European Investment Bank:

EIB cooperate with many local financial intermediaries in the European Union^[28].

Uptake & impact

British Business Bank:

ENABLE Guarantee with Oxbury Bank - approximately 170 smaller rural economy businesses supported (at July 2024) through £140 million in finance^[29].

European Investment Bank:

The 2019 EIB loans package was close to full subscription within 6 months suggesting strong uptake^[30].

European agricultural case studies

The EU has, in recent years, set out its approach to support young farmers, including its Joint Initiative for improving access to funding for European Union Young Farmers in 2019 ^[31] and the EU Strategy for Generational Renewal in Agriculture in 2025, which proposes further actions on access to finance for the upcoming Common Agricultural Policy (CAP) 2028-2034. The Strategy recommends loan and guarantee funds targeted to young farmers so that they can benefit from both lower interest rates and collateral, with options for grace periods and longer repayment periods in a ‘Starter Pack’^[32]. Other proposed actions include higher grant rates/extra points for projects led by underrepresented groups, particularly young female farmers^[33].

In 2019, the European Investment Bank (EIB) announced a €700m package of loans for small and medium-sized agricultural enterprises, with 10% set aside specifically for young farmers (aged under 41). Competitive financing, terms of up to 15 years and five-year grace periods were seen as especially beneficial, with the loans being managed by local banks and leasing companies^[34]. A parallel pilot loan of €75m for young farmers was also included in the package.

Under CAP 2023-2027, 3% of the direct payments budget of EU countries must be allocated towards supporting young farmers. This can come in the form of income support, investment support or start-up aid for young farmers^[35]. Complementary income support for young farmers can be provided for up to 5 years, with the options of an annual decoupled payment for eligible hectares (which Member States can define a maximum number of hectares of), or a lump sum payment^[36].

Ireland

With similar farmer demographics to Scotland, Irish farmers average 58 years old, with 33% of farmers aged 65 and over^[37]. Ireland’s CAP Strategic Plan 2023 – 2027 highlights the need to support young farmers via: ‘Effective mechanism[s] to increase the number of young farmers, including through income support, encouraging land mobility and succession planning’ and to ‘support young farmers in accessing finance so they are in a better position to invest in and develop their farm enterprise.’ ^[38] Actions identified to address these needs included grant rates that are higher for young farmers with qualifications for capital investment measures, and support for collaborative farming^[39]. Under the Targeted Agriculture Modernisation Scheme (TAMS), running from 2023 to 2027, grant rates of 60% are available to young farmers for capital investment, where they have completed a specified course, otherwise the grant rate is 40%, on investments of up to €90,000 per holding^[40].

Similar to the UK, Ireland does not have specific government-backed loan schemes for young farmers or new entrants. Challenges related to Brexit, including a weaker Sterling and reduced commodity prices, prompted the launch of the Agriculture Cash Flow Support Scheme in January 2017, which ran until September 2017. The scheme made available unsecured loans to a maximum of €150,000 with a 6 year term and a fixed interest rate of 2.95%. The Irish government provided funding, in addition to the Strategic Banking Corporation of Ireland (SBCI) providing a guarantee and the EIF providing a counter-guarantee under the programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME). By December 2017, 4,246 SMEs had been supported through the scheme through €145m of loans, with the average loan being €34,130^[41].

A specific loan scheme for farmers was not identified as an action in Ireland’s CAP Strategic Plan 2023-2027, although available loan schemes that farmers could apply to were noted. The CAP Strategic Plan also detailed reasons why a specific agri-food loan scheme was not established, noting that a cross-Governmental schemes are effective in catering to the sector’s needs when the Irish market is ‘relatively small’ and provide ‘administrative synergies.^[42]

However, the Future Growth Loan Scheme (FGLS, 2019-2023) – a more general sector agnostic government-backed loan - opened for SMEs, small mid-caps^[43] and businesses operating in the primary agriculture and seafood sectors^[44]. Farmers were eligible for loans between €50,000 and €3 million with terms of 8-10 years. Initial maximum interest rates were 3.5% on loans over €249,999 and 4.5% on loans under €250,000^[45]. Loans of less than €250,000 did not require a business plan to be submitted with applications, whilst those above €250,000 did.

The FGLS used an uncapped counter-guarantee^[46] to the Strategic Banking Corporation of Ireland (SBCI). If borrowers defaulted, losses were covered in stages. The Irish Government underwrote the first loss piece and the mezzanine and senior tranche were underwritten by the EIB with intermediation by the European Investment Fund (EIF)^[47](with the EIB as counter-guarantor). As the EIB has an AAA credit rating, this helped to provide capital relief to the financial intermediaries involved, which was passed on to the borrower via lower borrowing costs^[48]. However, an independent review of the FGLS by SQW suggested future schemes should tailor lending for agricultural businesses and in particular to young farmers when larger/established farms are favoured by lenders^[49].Findings from 2023^[50] detailed a total of 1,190 loans (valued at €523,706,000) between 2019-2022, with only 43 defaulting (total value of €3,792,000).

The successor of the FGLS, the Growth and Sustainability Loan Scheme (GSLS), which runs until the end of June 2026 (or earlier if fully subscribed) is backed by the EIB with the SBCI acting as a financial intermediary. Developed for SMEs, 30% of loans are intended for environmental sustainability and 70% for investments that increase competitiveness and productivity. The loans are designed for long-term investments for business growth and resilience, including for machinery and equipment, improvement of premises, business expansion and tangible and intangible asset investments^[51].

Similar to the FGLS, the GSLS is not specifically targeted towards the agricultural sector, but the highest proportion, approximately 36%, of disbursed loans were made to businesses in agriculture, forestry and fishing, as of 30 June 2024, with just under 50% of loans to agricultural sector businesses disbursed to dairy farms^[52], followed by beef (16%) and mixed (15%) farms.

Loans available under the scheme range from €25,000 to €3,000,000, with a 64% guarantee on loans to €500,000 over a 7–10-year period in addition to “selective interest rates”³⁴. A Strategic Banking Corporation of Ireland quarterly report of the GSLS at 30^th September 2025 details 71% of 1,862 drawn loans with an interest rate of <5% and 3% with an interest rate of >10%^[53].

The GSLS also has a capped counter guarantee with losses covered in stages when borrowers default. Initial losses of around the first 18% are covered by the Irish Government. This is followed by the EIB Group covering the next portion of losses to 62%- the mezzanine and senior tranches – with the SBCI retaining 20% of the risks³⁴.

France

In recent years, the French Government has made available loan measures targeted at young farmers and new entrants. For example, the Initiative Nationale pour l’Agriculture Francaise (The French National Agricultural Initiative) was a component of the French Investment Plan 2018-2022, providing improved access to debt finance for young farmers in France^[54]. This involved four financial intermediaries providing loans with a 80% maximum counter guarantee. The guarantee was valid for 10 years, although loans could have a longer maturity, meaning that they would continue without a guarantee on the remaining term. For the total amount of all loans provided, a maximum of 11% of this value would be provided under guarantee, meaning that losses after this value was reached would not be covered. The French Ministry of Agriculture and European Strategic Fund Investments were responsible for the respective first loss and second loss portions of the guarantee.

The French Ministry of Agriculture, Agri-Food and Food Sovereignty reports^[55] that under this first phase, 70% of the loan beneficiaries were farmers under 40 years of age out of approximately 8,500 loans provided, with a total value of €1bn. Over 80% of the loans were also reported to have been provided to new entrants. As at February 2021, the average loan amount issued was €131,000^[56]. A second phase, due to the success of the first phase, extending the scheme to 2028, is anticipated to lead the scheme to have reached over 15,000 farmers.

80% of farmers in France are reported to be clients of Credit Agricole^[57]. Measures for new entrant farmers developed by Credit Agricole include their Agri-Viti Zero-Interest Loan Boost, which sought applications from February 2024 until 31 December 2025. This was a loan scheme targeted at new entrants to agriculture, eligible to apply within one year of having established their business. New entrant farmers were required to take out an initial loan from their French Regional Bank. When they then took out an additional loan with Credit Agricole (up to 35% of the amount of their initial loan, with a limit of €50,000), Credit Agricole would provide this loan with 0% interest, with a minimum term of 2 years and maximum term of 15 years. Importantly to note, upon the Regional Bank reviewing the application, a guarantee may have been required by the applicant.^[58]

Italy

The Istituto di Servizi per il Mercato Agricolo Alimentare (ISMEA) – Institute of Services for the Agricultural Food Market – is a public financial institution in Italy which manages the Generazione Terra^[59] measure^[60]. This scheme, first established in 2023, assists young Italian farmers by providing loans for the purchase of agricultural land, funding rounds in both 2023 and 2024. Young farmers applying are defined as either ‘young agricultural entrepreneurs,’ ‘experienced young startuppers’ or a ‘young startupper with title.’ The first two definitions include farmers aged 41 and under and the third farmers aged 35 and under. Farmers in the category young agricultural entrepreneurs are those aiming to expand their farm by purchasing land, experienced young startuppers are those seeking to buy land to use for a new agricultural business venture and young startuppers with title are those that do not have agricultural experience but aim to buy land to start a new agricultural business.

There are two options open to applicants:

• In the first option ISMEA purchases the land and retains the title with a Patto di Riservato Dominio (PRD) – Retention of Title – agreement. The applicant repays the loan over a period of 15 – 30 years and once fully paid, the PRD is cancelled.
• In the second option the applicant buys the land with a mortgage granted by ISMEA. €1.5m is the maximum financing total for young agricultural entrepreneurs and young start-uppers with experience, whilst €500,000 is the maximum financing total for young start-uppers with a qualification under the PRD option, so out-with these bounds, a mortgage may be granted. This is a first rank mortgage on the land and/or other assets with a security value equal to 120% of the mortgage loan. I.e., ISMEA holds security over the land until the mortgage is repaid.

The funding is provided on a first come, first served basis, with €70m split between north and south Italy, with ‘young start-uppers with qualifications’ allocated a funding pot of €10m.

Grace periods of up to 24 months are available to applicants. There is a fixed interest rate for the duration of the loan, with components of the interest rate including a 0.05% admin cost, the EU base rate prior to signing the contract and the applicant’s credit risk spread (0.60% - 2.20%). With no credit history, or for companies still to be established, the credit risk spread is set to 2.20%. However, beneficiaries can request one revision of the interest rate over the loan term, after the first 5 years, if the farmer has no outstanding payments or other obligations to be met. A review can be requested relating to the present EU base rate and the beneficiary’s present (updated since their application) credit risk rating. ISMEA notes that any additional fees for applicants such as legal fees, taxes etc are not included in the financing amounts.

Other EU Member States

In Spain, the Linea ICO-MAPA-SAECA (Instituto de Crédito Oficial – Ministerio de Agricultura, Pesca y Alimentación - Sociedad Anónima Estatal de Caución Agraria) is a loan guarantee scheme launched in 2022 for Spanish farmers where they are experiencing exceptional circumstances (extreme weather conditions, supply of raw materials being seriously disrupted due to global market conditions and health or food crises). It aims to improve the viability and regular operation of agricultural holdings. In 2024, another funding round was opened using the same instrument but specifically for young farmers aged under 41 where ICO, Spain’s state-owned bank, provides loans of up to €400,000 for individuals or sole traders and up to €600,000 for companies/legal entities. Loan terms are up to 15 years, with potential grace periods of between 1 and 3 years. There is a 15% subsidy on the principal amount of the loan, up to a maximum of €15,000 and the cost of the guarantee is subsidised for the first 6 years of the loan term. This means, for example, if an applicant was granted a loan of €100,000, they effectively require to repay €85,000 (plus interest). The guarantee is provided by SAECA - Spain’s State-owned Agricultural Guarantee Corporation^[61].

In Lithuania, under the ‘Establishment of Young Farmers’ measure^[62] of the CAP Strategic Plan for Lithuania, 2023-2027^[63], young farmers can apply for preferential loans as well as grants, or a combination of both. The scheme is for new entrants, established within 2 years of applying, with new entrants requiring a business plan to be submitted as part of their application. Applicants must have a Lithuanian equivalent standard output (SO) of <=€70,000, with the potential for a SO stated in the business plan of between €12,000 and €70,000. The maximum loan amount is €100,000^[64] (which also includes a grant and loan amount together, if applying for both), with the loans having a 5 year maximum term. Interest is paid on the financial intermediary part of the loan (which is not less than 40%), with rates based on market conditions.

The Netherlands Vermogensversterkend Krediet (VVK) scheme opened in January 2020 targeting young farmer successors of family businesses with loans of up to €2.5 million^[65]. The scheme provided a guarantee on 2/3 of the loan amount, with the government guaranteeing 90% of this. There was an allocated budget of €75 million. However, in the first 2 years, there were only 6 applicants, which prompted the Government of the Netherlands to commission an interim evaluation. Research undertaken by Andersson Elffers Felix^[66][67] found that wider issues around unclear government policy direction and farm profitability were among key factors that farmers of all ages were dealing with which the scheme did not address, whilst correspondence from the Dutch Minister for Agriculture, Piet Adema to the Netherlands House of Representatives in April 2024, noted that loans under the scheme for investments did not effectively meet farmer needs after takeover of businesses^[68].