Investment aid
INVESTMENT AID AID FOR VIABLE FARM HOLDINGS AND SKILLED FARMERS Agricultural investment aid makes it possible to grant aid and interest subsidy to finance the most important fixed investments of a farm business. The aid consists of a significant portion of finance, without which many projects would remain unexecuted. In addition to finance, an applicant can be granted government guarantee in security for an investment loan, if the holding's own collateral is insufficient. This guide describes in greater detail to what kind of farm business is eligible for finance and on what terms. It also describes projects eligible for aid and their aid rates. Farm business eligible for aid A farm holding, or a farm, is defined as an agricultural complex formed by one or several estates managed as a single entity on the basis of ownership or lease. If no arable land is needed in production, the areas used by the business with buildings and movables are sufficient. The spectrum of farming proper is wide. Financial aid is granted to the following lines of production: Arable farming and livestock farming Greenhouse vegetable production Gardening and nursery gardening Fur farming Equine husbandry, mostly horse breeding Reindeer husbandry Honey bee husbandry Commercial hunting Other agriculture Entrepreneurial income Adequate farm business performance, or profitability, forms the key requirement set for a farm. It is measured using a farm income statement on the basis of which entrepreneurial income should amount to at least 25,000 euros. The farm holding's development measures can be taken into account, since the requirement can be fulfilled only on the fifth year of granting the aid. Only agricultural activities can be included in the statement. This means the farm's forest income and any small-business income cannot be included in the statement. Entrepreneurial income is calculated by deducting variable and fixed expenses, excluding provisions, and depreciation/amortisation and interest on loans from farm income. Depreciation is calculated on the fair value of buildings and machines, not according to net expenditures used for tax purposes. The depreciation rates used in the calculation are as follows: Buildings 4% Machines 10% Underdrains 3% Exceptions to the criterion for entrepreneurial income The following criterion has not been set for the following projects:
Underdrainage Purchase of joint machinery (potato and sugar beet harvesters) Honey bee husbandry Environmental projects and animal welfare In these projects, the assessment is chiefly based on the holding's accounting records. Business plan A business plan must be appended to the application for finance. Form 3430 must be used to prepare the plan. A business plan is not required for underdrainage projects, purchase of harvesters and environmental and honey bee projects which also have no limit for entrepreneurial income. The business plan is a multi-page form showing production resources, workforce and specifying goals for developing the farm and the measures taken to achieve them. Farming profitability and liquidity calculations are appended to the business plan, with ProAgria's Likwi and Suonentieto's CashMan applications being the most favourite ones. Charges for farming out the preparation of a business plan can be included in total capital expenditure. Size of farm holding No minimum or maximum conditions have been set for the farm's size. Neither are there limits for the number of farm workers; hiring employees to work on the farm is also possible. The only criterion is the entrepreneurial income requirement 25,000 euros of agricultural activities. Leasing a farm holding A farm lessee is also eligible for investment aid. If there is an intention to build on the leased grounds, the lease must have been valid for at least 10 years and be in compliance with the Finnish Code of Real Estate. No other terms have been set for lease. TERMS AND CONDITIONS GOVERNING AID APPLICANTS Financial aid can be granted to the farm owner or the farm lessee. There may be several applications because financing farmers' joint projects is also possible. A company established to engage in agriculture is also an eligible applicant. Full-time farming No limit exists for income generated outside of the farm holding; only farming income matters. Income limits
Absolute income limits have been set only for home loan applicants. The applicant's total annual income may not exceed 38,000 euros. The annual combined income of spouses or common-law spouses may not exceed 54,000 euros. Common-law spouses are regarded as couples living in marriage-like circumstances. The maximum total income increases by 2,000 euros for each child who has been under 18 years of age throughout the year of application. On the other hand, a home loan applicant is subject to a less strict entrepreneurial income requirement. No business plan is needed but continuously profitable business operations are required. To meet the case in this respect, net farm income, forestry included, is at least 10,000 euros. Residing on the farm Living on the farm or near it is not required for an investment and start-up aid. Skills The applicant's skills requirements are relatively low when the farm's line of production does not change as part of the investment; in such a case a three-year experience in agriculture is adequate. If the applicant is eligible for the so-called increased aid for young farmers in domestic animal investments, he/she must fulfil the criteria for the start-up aid for young farmers. In such a case, he/she must have not only the three-year agricultural experience but also at least 20 credits in agricultural studies. If the line of production changes or the applicant lacks the required three-year experience, he/she should have upper secondary education in natural resources or appropriate education relevant to business. In its absence, the three-year experience and education of 10 credits are considered adequate. Age The applicant must be at least 18 years of age. No maximum age applies to investment aid any longer. The applicant for a start-up aid for young farmers must be under 41 years at the time of application. Spouses and the farm's joint owners Both spouses must sign a financial aid application if they are co-owners of the farm holding. This is also the case when only one of the spouses is the entrepreneur proper. At least one of the spouses co-owning the holding must meet the terms and conditions for financial aid. If the spouse fulfilling such terms and conditions manages at least a third of the holding, the aid can be granted. The holding's joint owners are eligible for the aid if they all apply for it and at least a third of the holding is owned or possessed by parties who fulfil the other terms and conditions for the aid too. Farm holding's legal form All legal forms are possible for a farm. Persons fulfilling the terms must have control over the business. This materialises in various legal forms when: the person fulfilling the terms have control and the majority shares in a limited liability company the term is also fulfilled for a limited liability company when its owner is another limited liability company whose owners fulfil the above conditions
all partners in a general partnership fulfil the conditions the majority of the ordinary partners in a limited partnership fulfil the conditions the majority of members of a cooperative society fulfil the conditions. A company jointly owned by farmers established for owning, for example a dryer or machinery, is an exception in that at least half of the joint owners must fulfil the terms and conditions for financial aid. This is because the company is not itself engaged in agriculture. TERMS AND CONDITIONS FOR FINANCE Maximum aid A single applicant is eligible for investment aid worth a maximum of 1,500,000 euros in periods of three years. A grant and an interest subsidy granted for an interest-subsidy loan are included in the aid. The minimum investment aid is 3,000 euros and 7,000 euros in construction projects. Eligible construction costs In construction projects, a building engineer of the Centre of Economic Development, Transport and the Environment (ELY) calculates eligible costs based on the regulations of the Ministry of Agriculture and Forestry. Investment aid will be calculated on that amount if it is lower than the cost estimate. Young farmers A young farmer is eligible to receive higher aid than others in certain projects. A farmer is defined as a young farmer when he/she is under 41 years of age when applying for the aid and has run his/her farm for less than 5 years. In addition, he/she must fulfil the terms governing the skills of a young farmer for being eligible to the start-up aid, i.e. he/she must not only have at least 20 credits in agricultural studies but also three years of experience. Replacement investments Aid can also be granted for replacement investments, i.e. projects where production is not expanded but the farmer only wants to update the existing structures and machinery. Competitive tendering The beneficiary of investment aid must call for tenders for purchases if the aid accounts for more than 50 per cent of the total costs of the purchase. Grant and interest subsidy on the interest-subsidy loan are included in the aid. He/she does not need to call for tenders for very small purchases; the limit is 150,000 euros for construction projects and 30,000 euros for machine purchases. Investment aid is always calculated on the eligible costs computed by the ELY Centre that may be lower than the actual costs. The aid may therefore be below 50 per cent of the actual costs even if the level of aid were otherwise higher than that. Tendering procedures must be documented in sufficient detail. Open calls for tenders must be drawn up carefully, must indicate all relevant information and the criteria on the basis of which the bid will be accepted.
Furthermore, they must be published in the Hilma notification channel at www.hankintailmoitukset.fi. If the beneficiary does not send a notification, the ELY centre must do it. APPLYING FOR AND GRANTING FINANCIAL AID Applying for aid Form 3314 must be used to apply for investment aid and form 3319 to apply for start-up aid for young farmers. The application must be accompanied by the bank's loan promise using form 3311. The bank's loan promise, cost estimates, drawings, environmental licences and other documents plus the business plan must be appended to the application. The application must be delivered to the region's ELY centre. The applicant should note in the application stage that he/she may not begin a project or even purchase any supplies before he/she has received a decision on the aid. Electronic application process The Agency for Rural Affairs (Mavi) recommends using the Hyrrä information system to submit applications. The purpose is to digitise the application and decision process of start-up and investment aids as far as possible. To use the Hyrrä service, applicants must obtain Katso identifiers available at yritys.tunnistus.fi. The abovementioned appendices must be attached on the Hyrrä service in electronic form. They can be scanned or otherwise attached to the service. By means of Hyrrä, the applicant can track the processing of his/her application in the ELY centre. Processing applications Applications can be submitted to the ELY centre on an ongoing basis. However, they will be processed only after the application periods shown below. Applications for investment aid 16 October 15 January 16 January 15 March 16 March 15 August 16 August 15 October Applications for start-up aid 1 November 31 January 1 February 30 April 1 May 31 July 1 August 31 October After the deadline, the ELY centre will make a decision in respect of all applications. If the ELY centre cannot process an application due to insufficient information so as to approve the application, it can be processed in the next application round.
Scoring projects The ELY centre scores each application based on the criteria stated below. If the number of applications is above the funds available, the aid will be granted for the applications ranked based on their scores to the extent the funds are available. Scoring criteria and weightings of investment aid: Effect on the company's finances (weighting 25%) Effect on the company's competitiveness (weighting 20%) Effect on the environment (weighting 20%) Effect on production conditions (weighting 15%) Effect on the achievement of the objectives under the programme, e.g. joint project (weighting 10%) Importance of the business to total income formation and the effect of the project eligible for aid (weighting 10%). Each category can get scores from 1 to 3. The applicant must earn scores from at least three categories in such a way that the weighted score is at least 1.1. Initiating a project The applicant may not begin a project or purchase a movable until the ELY centre has issued its decision to grant aid. If he/she has begun the project before that, he/she will have no opportunity for the aid any longer. The applicant should not purchase any construction materials either before the decision. This is because the investment aid is disbursed on the basis of the existing receipts and their date may not be older than that of the decision to grant the aid. Below is a list of projects regarded as having been initiated: New construction projects when laying a concrete foundation has begun or the related final contract has been signed Renovations when the related work has begun or a work contract has been concluded Machinery and equipment purchases when the order or purchase agreement has been made or part of the purchase price has been paid. PROJECTS ELIGIBLE FOR INVESTMENT AID Dairy cattle and beef cattle houses Aid is granted for the construction, extension and renovation of dairy cattle houses. It will be calculated based on the eligible costs confirmed by the ministry if they are lower than the costs based on the cost estimate. For example, the standard costs of a milking station are calculated according to the conventional milking station even if a milking robot were bought in the cowhouse. The cost estimate may also include a separate mash cart or another fodder distributor, if no fixed feeding system is built in the house. Mini loaders or tractors are not accepted. In addition to domestic animal houses, manure storages, feed warehouses and exercise areas are eligible for aid according to the aid rates shown below.
AB zone 40 60 10 - young 50 60 10 C zone 35 60 10 - young 45 60 10 Piggeries Pig farming construction aid can be granted for construction, extension and renovation. In addition to pig houses, feed warehouses and manure storages are eligible for aid. Aid can also be granted for building new gas-tight grain silos. Applications are also accepted for financing the alteration of piggeries related to animal welfare (see animal welfare projects). Investment aid accounts for a maximum of the cost estimate based on the below percentages or of the eligible costs. Aid out of costs (excl. VAT): 30 65 10 - young 40 65 10 Meat poultry farming Construction aid can be granted for the construction, extension and renovation of broiler chicken and turkey houses. Manure storages and feed warehouses are also eligible for financial aid. Aid granted is based on the cost estimate and eligible costs applying the percentages shown below. Aid out of costs (excl. VAT): 20 65 10
- young 30 65 10 Goats and lambs Aid can be granted for building, extending and renovating facilities in goat and lamb husbandry. The cost estimate may also include a separate mash cart or another fodder distributor, if no fixed feeding system is built in the house. The same aid percentages also apply to finance the required manure storages and feed warehouses. Aid granted is based on the cost estimate and eligible costs applying the percentages shown below. AB zone 40 60 10 - young 50 60 10 C zone 35 60 10 - young 45 60 10 Equine husbandry Equine husbandry investment aid is granted only for building, extending and renovating buildings related to horse breeding. Financial aid for services related to horses can be applied for in the form of small business aid. Such services include riding, argitourism and trotting training. In addition to horse stables, aid can be granted for building a manure storage, feed warehouse and exercise area. Aid granted is based on the cost estimate and eligible costs applying the percentages shown below. 30 65 10 Fur farming In fur farming, aid can be granted for investments in building shadow houses, uninsulated animal sheds, processing facilities, manure storages and production warehouses as well as for enclosing the farm with a fence. Fur farms are also eligible for energy production subsidy and aid related to the environment and animal welfare. Aid granted is based on the cost estimate and eligible costs applying the percentages shown below.
- 65 10 Driers Aid can be granted for building, extending and renovating grain and hay dry-houses. Purchase of mobile dryers is also eligible for aid. Aid is granted for the costs of the dryer's heating element on the terms of the heating element investment. Aid granted is based on the cost estimate and eligible costs applying the percentages shown below. *) 25 65 10 *) Aid can be granted with a 5 percentage point increase if the dry-house is used to dry grain or hay of two or more farms.. Production warehouse Financial aid can be granted for investment in building a produce, input or supply warehouse necessary in agricultural production. Aid granted is based on the cost estimate and eligible costs applying the percentages shown below. 30 65 10 Heating plant/energy production Energy production is eligible for aid to the extent the energy generated is used in agricultural production. The heating plan must use a renewable source of energy. It may also be peat if heating can also be generated through a renewable source of energy. If the main purpose is to generate power from biomass, aid can be granted if heat energy is used at least 10 per cent of the total energy generation. Aid granted is based on the cost estimate and eligible costs as shown below.
40 - - Machine storages Aid can be granted for building, extending and renovating a storage building intended for agricultural machinery. 20 - - subsidy Underdrainage Underdrainage is eligible for aid. An underdrainage plan must include at least a plan map, plan description, work description and cost estimate. Building a small pumping plant or piping main drainage canals is not eligible for aid. 35 - - The amount of aid can be increased by 5 percentage points if controlled underdrainage is involved. Harvesters Purchase of harvesters is eligible for aid. However, aid can be granted only for the joint purchase of a sugar beet and potato harvester. 10 - - Working environment, environmental projects, animal welfare and production hygiene Aid can be granted for construction as well as the purchase of a machine or equipment if the purpose is to improve
the working conditions of a person working in an agricultural production building production hygiene of a farm business animal welfare the condition of the environment. If the purpose is to purchase machinery or equipment that makes the job easier, tractors and mini loaders do not fall within the scope of aid. Measures to improve the condition of the environment may involve, say, building, extending and renovating manure storages, liquid manure tanks etc. 35 - - Greenhouse vegetable production Aid can be granted for building, extending and renovating greenhouses and for building facilities needed in production. Purchase of a tunnel needed in the production of garden plants farmed for food production is also eligible for aid. A project related to the heating plant is financed on the terms of the energy production project. Aid granted is based on the cost estimate and eligible costs applying the percentages shown below. AB 30 65 10 zone - young 40 65 10 Honey bee husbandry In honey bee husbandry, aid can be granted for a building investment and the purchase of machinery and equipment, such as beekeeping supplies, processing facilities and storages and the purchase of honey extractors. 25 - -
Preparing farm products for sale Aid can be granted for preparing farm products for sale in case related investment applies to erecting buildings or structures and purchasing machinery and equipment. This activity must mainly make use of a farm's raw materials. Products must be prepared for sale by retailers or processing firms. They must fulfil the criteria for a farm product after processing too. However, aid is not granted for egg packing plants and the preparation of reindeer meat for sale. Aid granted is based on the cost estimate and eligible costs applying the percentages shown below. 30 - - Residential buildings Building, extending and renovating a residential farm building are eligible for applying for an interest-subsidy loan. The maximum loan amount accounts for 70 per cent of the eligible costs and the interest subsidy granted for the loan accounts for a maximum of 15 per cent. The residential building may be occupied by the family itself, parents who have left the farm, future successors or farm employees. The eligible costs of the residential building are calculated based on the unit costs specified by the Ministry of Agriculture and Forestry. The floor area of a new residential building and a building to be extended is a maximum of 120 square metres but the floor area to be built may be larger. If the household comprises more than six members, the floor area eligible for aid can be increased by ten square metres per person added. In renovation, the floor area eligible for aid may not exceed 180 square metres. Filling in a business plan is not required for a farm. FORMS OF AID subsidy loan The interest subsidy loan reference interest rate and markup as well as the loan term are agreed with the bank in the same way as for the terms and conditions of the loans subject to standard terms. The government pays a maximum of three percentage point interest subsidy on the loan. The borrower, however, always pays interest of at least one per cent. The interest rate for the interest subsidy loan can also be agreed to a fixed one for specified period. The markup can also be changed based on an agreement between the borrower and the bank during the loan term.
The loan term may be a maximum of 25 years. It can be agreed on a case-by-case basis. subsidy granted for the loan is not necessarily enough for the entire loan term. After the subsidy has been used up, the borrower will pay interest on the loan based on the loan's total interest rate. The interest subsidy loan is granted from the bank's funds and requires collateral to be obtained based on the normal banking practice. A government guarantee may also be applied for the loan. Government guarantee A government guarantee can applied for the interest subsidy loan or a bank loan governed by standard terms and conditions, if collateral securities are otherwise insufficient. Receiving the guarantee is governed by the same terms as granting investment aid. Guarantee can be granted for construction investments in dairy cattle and beef cattle husbandry, pig farming, lamb and goat husbandry, meat poultry farming, equine husbandry and greenhouse vegetable production as well as the purchase of a plant tunnel and fur farming investments. The guarantee is subject to charge: it accounts for 0.75 per cent of the loan, or no more than 200 euros, and thereafter 0.75 per cent of the remaining principal on a half-year basis. Aid included in the guarantee, usually less than 1 per cent of the costs, is deducted chiefly from the amount of the loan's interest subsidy. Hire purchase and lease as part of finance Hire purchase can also be used to finance project costs. For example, machine purchases for a building project can be financed this way instead of a standard bank loan. Investment aid is calculated based on the eligible costs, irrespective of how the project is financed. At the time of aid drawdown, receipts of actual costs are needed on the basis of which the ELY centre will pay aid into the account of the beneficiary and give permission to drawdown the interest subsidy loan. A hire purchase agreement can be accepted as the actual cost of the project. Hire purchase requires that: the financing agreement oblige the payment of the cost to the finance company the finance company has made the payment to the seller the property has been delivered to the beneficiary the beneficiary can perform depreciation and VAT deduction. AID DRAWDOWN The construction work has a completion time of two years. During that time, the work must at least begin and, if needed, file an application for extension with the ELY centre. Such an extension can be applied for one year at a time and no more than for two years. A loan and aid granted for construction and other work are drawn down in five instalments, of which the first and the last one account for a minimum of 20 per cent of the loan.
Aid is drawn down based on the receipts generated. The final one per cent drawdown indicates that the project has been completed. The aid beneficiary must provide the ELY centre with documents which is in charge of the payment of the aid and gives permission to draw down the interest subsidy loan. The completion time for movable property purchase and underdrainage is two years. It is possible to grant a period of extension in the same way as for construction. The first instalment of the aid and interest subsidy loan granted for projects must be drawn down within the period of completion. The second instalment is available for drawdown no later than 5 months of the date of project completion. OP COOPERATIVE BANK AS HELPING HAND FOR INVESTORS It is advisable to start planning an investment by negotiating with the bank to put project financing in order. The project usually always needs finance provided by the bank, and the bank's loan promise must also be appended to the interest subsidy loan application. The bank also assists in filing an investment aid application and mapping out various sources of finance. It is advisable to plan financing early enough because a bank's financing decision, especially that on major projects, requires some preparation. At the same time, this involves collateral arrangements and analysing other service needs related to the project, such as payment transactions and insurance.