Sources of Credit
There are various options available to a farmer who needs credit.
Possible Sources of Credit
• Commercial Banks (BOI, AIB etc) -- Loans of different types, eg overdrafts, term loans, mortgages, personal loans.
• Merchant Credit or Co-op Credit -- Payment for purchases is not required immediately, eg seeds and sprays can be paid for after the harvest
• Hire Purchase Companies -- Offer immediate use of an item and eventually full ownership once all payments are made. Payments are made monthly with a fixed interest rate over a specified period.
• Leasing Companies -- Lease items to their customers who have immediate use of the item with the option to purchase once the lease is complete.
• Building Societies -- Offer loans for the financing and building of houses.
• Credit Unions – Offer loans to members.
• Individuals – Borrowing money from a relative or friend.
Types of Credit available:
• Overdraft – available from banks, can be used to finance day to day running of the farm and the seasonal nature of the business
• Term Loans - a fixed amount of money is borrowed over a specified period of time
• Mortgage – generally for building a house and can be obtained from a commercial bank or building society
• Merchant credit – goods bought on credit from a merchant or co-op
• Hire purchase – monthly instalments are paid with a fixed interest rate over a specified period
• Leasing – goods and equipment are leased for a required period with the option to buy after the lease period
The chances of a farmer obtaining credit from a financial institution is determined by his/her Borrowing Capacity which the lender will assess.
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