The Scottish Government

Introduction

This Option is aimed at helping young farmers who are starting a farming business for the first time to develop the business in the critical early stages. It provides interest rate relief of up to £27,397 on a commercial business development loan.

What will this achieve?

Young new entrants to farming often find it difficult to raise the capital needed to acquire and develop their new business. Providing support for business development in the critical early stages will make it easier for new entrants to access business development capital. It will also provide encouragement for them to enter the industry in the first place.

The measure will therefore contribute towards an increase in the number of young entrepreneurs entering farming and building profitable, innovative businesses which respond to the industry's changing economic environment.

What can you do?

This support will help you to access a commercial loan to develop your business, for example

• towards the purchase of equipment or machinery or livestock
• the construction or development of buildings and infrastructure
• the provision of working capital.

This can be for the core agricultural business or for a diversification opportunity. This support cannot be used in relation to a loan for the purchase of land.

Who can apply?

Young adult farmers or crofters who, at the time of committing a proposal:

• are over 16 years but under 40 years of age
• have for the first time set up as the head of an agricultural business (either as sole proprietor; or as the majority partner; or as the equal partner with another farmer or farmers under 40 years of age) registered on the Scottish Government's Integrated Administrative Control System (IACS)
• have been head of that business for not more than 12 months.

Eligibility criteria

The agricultural business must have an agricultural Standard Labour Requirement (SLR) size of 0·5 Full-Time Equivalents (FTE) or greater. One FTE consists of 1,900 SLRs (see Annex to calculate size of holding).

The business must be viable, taking account of all income streams: or the business development plan, including financial estimates, must show that the business will become viable within 5 years after the approval date.

Please note that you cannot apply for interest rate relief on existing loans.

The submitted proposal must include:

• A copy of the business plan agreed and endorsed by the lending institution and including the information and undertakings (as appropriate):- see below
• A letter of approval from the lending institution setting out the offer of a loan
• Details of the separate bank account set up for the project
• Proof of suitable agricultural qualification or a personal development plan
• A copy of your birth certificate or other proof of age
• Evidence that the business has an agricultural Standard Labour Requirement of at least 0·5 Full Time Equivalent

You must either have

• a suitable agricultural qualification (at least to National Vocational Qualification Level 2); or
• demonstrate 5 years practical agricultural experience and include with the business plan a personal development plan with an objective to achieve an appropriate qualification within 3 years after the approval date for grant.

You must set up a separate account in a lending institution held solely to service the project for which the grant has been approved.

You must undertake to comply with animal health and welfare legislation and with cross compliance requirements (Statutory Management Requirements and Good Agricultural and Environmental Conditions).

A business plan must include

1. details of the initial state of the business
2. the scope and aims of the business development project, with milestones for development
3. the investments involved
4. and any training, advice or other action required
5. If not already achieved, you must have as an objective to achieve membership of an appropriate Quality Assurance Scheme within 3 years after the approval date for grant.

What costs could be supported?

The grant will support the interest rate costs on a commercial business development loan from an authorised deposit taker (For example, a high street bank or building society), up to a maximum of £27,397 over a maximum of 5 years and up to a maximum interest rate of 3·5% above the Bank of England base rate at the time of application.

Where the amount of interest payable exceeds £27,397 or the interest rate is higher than 3·5% above the Bank of England base rate, you will be responsible for paying the extra costs. Grant will be paid annually in arrears.

Rate of support

The grant will cover the full cost of the interest payable, up to a maximum of £27,397 over 5 years and up to a maximum interest rate of 3·5% above the Bank of England base rate at the time of application.

Inspections/verification

To verify the information submitted, the Scottish Government may carry out checks, including a separate business test or seek clarification or further evidence relating to any aspect of the application and supporting information.

Claims for grant have to be supported by a statement from the lending institution setting out the capital and interest payments made over the year to which the claim relates. Where payments have not been made in line with the agreed schedule, the Scottish Government will not pay towards any additional interest that has accrued and this may result in aid being withheld or withdrawn.

The business plan will be reviewed by the Scottish Government within 5 years of the approval date for grant, and before the final payment of grant. The review will compare progress against the business plan and consider any discrepancy.

Where the project includes an objective to achieve a suitable qualification or membership of an appropriate Quality Assurance Scheme within 3 years of the approval date, evidence of this will have to be provided before the third payment of grant is made.

Links to further guidance

Animal Health and Welfare
( www.scotland.gov.uk/Publications/2005/01/20517/49824)

Cross Compliance requirements
( www.scotland.gov.uk/publications/2005/12/0990918/09199)

Nitrate Vulnerable Zone (NVZ) requirements
( www.scotland.gov.uk/Publications/2003/04/17071/21662)

Accredited independent business advice ( www.lantra.co.uk/scotland)

Annex

STANDARD LABOUR REQUIREMENT FOR FARM ENTERPRISES

To calculate your farm business's SLR, select the enterprise(s) involved and multiply the number of "units" in your business by the number of SLRs per unit for each enterprise (ie column 1 x column 2). To be eligible for this Option, your total SLR must be at least 950.