4 PER CENT. LOANS

Dominion, Volume 28, Issue 174, 20 April 1935, Page 10

4 PER CENT. LOANS

Improvements in Dairy Industry FACTORY EQUIPMENT Advances to Companies and Farmers Loans at 4 per cent, are to be advanced by the Government to dairy companies and dairyfarmers for the purpose of effecting improvements in dairy factories and dairies, as provid ed for by the Agriculture (Emergency Powers) Act. 1934. A statement on the subject was made on Thursday by the acting-Minister of Finance. Hon A. Hamilton, who recently concluded discussions with the Minister of Agriculture, Hon C. E Macmillan, and members of the new Executive Commission of Agriculture Mr. Hamilton stated that authority was given in the Act for advances to be made on such terms and conditions as the Minister of Finance might prescribe for the following purposes:(a) The construction, reconstruction. equipment, and improvement of dairy factories. (b) Securing improved conditions in and about dairies (within the meaning of the Dairy Industry Act, 190 S) The Minister pointed out that it was the duty of the Minister of Finance to prescribe the terms and conditions upon which advances might be made, and he bad pleasure in now announcing that he had agreed to the rate of interest in respect of advances under the Act being fixed at 4 per cent. This low rate had been decided upon primarily as an inducement to ' dairycompanies and to dairyfarmers to. effect improvements that were regarded as urgently necessary. It was anticipated that the Government would be able to obtain good security for all advances made under the Act. Terms of Loans and Security. In the case of loans to dairy companies for the purpose of modernising the equipment in factories, the Minister said that loans would generally be made for terms of from one to 10 years, depending upon the circumstances of each case. The security to be taken for these loans would be by way of a debenture security over all the assets of the applicant company which would incorporate an agreement to repay the loans by the setting aside of a fixed proportion of the butterfat returns for the purpose. The Minister stated that he realised that in most cases the assets of the company would probably already be pledged either to the bank or to other lenders as security for advances already made. In such cases, said tiie Minister, tiie Government would be prepared to make advances on the security of a debenture ranking second to the existing debenture. It was-also recognised that the companies relied upon the banks for overdraft accommodation until the season’s produce was sold on the London market. The Minister added that the Government would be prepared, in taking a second debenture, to protect subsequent advances by the banks (which would usually be secured by a first debenture charge) up to an agreedupon limit. The precise details of the debenture to be taken to secure advances by the Government would perhaps vary iu individual cases. Advances to Farmers. “I have so far dealt with the question of loans to dairy companies, for the purpose of modernising factories,” continued the Minister. “The Act also provides for advances to dairyfarmers for the purpose of securing improved conditions in and about dairies. In this connection I would like to see — and my colleague the Minister of Agriculture and the members of the Executive Commission of Agriculture are with me in this —a measure of cooperation by dairy companies. Some companies already have power to borrow money for tiie purpose of lending to suppliers and have expressed their desire to do so. An extension of this principle would be very desirable in connection with the transactions now under consideration, that is to say, the Government would be pleased to consider applications from dairy companies for advances to enable the companies to make loans to their their suppliers for the purpose of effecting improvements in and about farm dairies. I need hardly stress the desirability of this from the dairy companies’ point of view, as it is conceivable that factories cannot continue to accept, supplies if conditions in the dairies are not up to standard. I am aware that some companies have passed resolutions restricting their operations to making butter and cheese, but it is hoped that these companies will pot consider it inconsistent with this policy to lend their support to this movement, which is designed to ensure them a continuity of supply of milk and cream of the highest quality. Repayment of Loans. Such loans to companies, the Minister added, would be secured by means of a floating debenture over the assets of the company, and it would be a matter for tile company to arrange with its farmer suppliers for the repayment of the loans. As an alternative he suggested that companies might see their way to guarantee repayment of advances made by the Government to approved farmer-sup-pliers. “In cases where arrangements cannot be made by the dairy companies to borrow for the purpose of lending to their suppliers,” added the Minister, “the Government would be prepared to consider applications from farmers who are desirous of improving the conditions iu and about their dairies. In such eases security will be taken byway of a binding and enforceable agreement between the Government, the farmer and his mortgagees for the repayment of the advance and interest thereon as a first charge on tiie produce from the farm. “I would like to emphasise,” continued the Minister, “that the security required in these eases will have to be agreed to not only by the farmer, but also by his mortgagees, but there is nothing unreasonable in this, as the loans concerned are to be granted only for the purpose of effecting essential improvements to tiie farms to enable production to be continued, and thereby adding to the value of the mortgagees’ security. This method will necessarily entail a certain amount of expense and trouble, which though reduced to a minimum, it is desirable to avoid if possible. It is therefore urged that the farmers should use their best endeavours to obtain their finance through their dairy companies, which, as already stated, the Government is prepared to assist for this purpose. “I would like to say.” said Mr. Hain-

ilton. "that the foregoing is but a general outline of the procedure which is to be adopted. The security may vary in individual cases, and each case will be dealt with on its merits.” The Minister concluded by saying that a circular would be issued as soon as possible to dairy companies detailing the administrative procedure in connection with applications and the specific purposes for which loans would be made available. . , ,