A new scheme allowing farmers to raise money against their single farm payment entitlements is due to be launched on Friday (Mar 10).
The Entitlement Release Scheme has been set up by quota and entitlement broker Ian Potter and Japanese investment bank Mizuho.
It is aimed at farmers who want to raise capital to improve their businesses, but who are unwilling or unable to increase other forms of lending.
Some farmers are looking to sell their entitlements, especially those facing tight cash flows caused by delayed single farm payment cheques.
But Mr Potter said they faced selling at knock-down prices.
“The amount of money that farmers are giving away by selling their entitlements today is huge,” he told a recent press conference in London.
“It really is a buyers market.”
Entitlements are assigned for the duration of the finance period, initially set at four years, to the new company.
Farmers receive an upfront lump sum, a minimum of £25,000.
They would also be paid about 30% of each annual SFP cheque over the loan period.
The remainder would be used to repay the advance. That equates to a fixed annual interest rate of 9%.
The full SFP income flow returns to the farmer after four years.
Mr Potter reckoned an English farm with 50 lowland entitlements might expect to receive €76,400 on the open market today.
Using the new scheme, it could qualify for an upfront payment of €66,729, and receive a further €107,475 up until 2013, a total of €174,204.
Mr Potter stressed that as farmers retained ownership of their entitlements, they would not be tied to this year’s tight trading deadlines.
They could apply for loans throughout the year (details at www.ipaquotas.co.uk). A postal and telephone-based service is planned.