Financing Rural Regeneration in Wicklow

One method of rural regeneration involves the financing of businesses in rural areas with outside assistance, which would not have succeeded independently and were encouraged through various government sponsored initiatives to regenerate declining rural economies. Grant aid would be the most utilised source of funding. Many of these enterprises that would have been set up by private individual entrepreneurs would be partly financed by owner’s equity as a condition of grant aid. Within this context of outside assisted enterprises, other sources of finance, subject to the terms of grant aid such as leasing of plant or hire purchase arrangements for vehicles would also be utilised.

Co-operative Societies have also been a source of finance in rural areas where conventional sources would have been unavailable due to the priority of profit distribution to outside shareholders. Co-operative shareholders however reinvest a larger share of profits back into the business and offer a greater degree of stability than conventional businesses more prone to outside market fluctuations.

LEADER companies were a successful source of funding enterprises in rural areas. They supported; private individuals develop enterprises in rural areas, community led projects, joint INTERREG programmes with partners in EU member states and community projects supported by other statutory bodies and projects initiated by the LEADER companies themselves. The terms of LEADER funded grant aid for private projects were subject to a limit of €7500, 50% for private projects, 80% for community based projects. LEADER funded Innovative Rural Enterprise, crafts enterprise and local service facilities, exploitation of agriculture, forestry and fishery products, enhancement of natural/built/social/cultural environment and environmentally friendly initiatives to a maximum of €65,000 at a rate of 50% Support is also available through LEADER plus for Rural Agri-tourism initiatives, product development of leisure recreational facilities and tourism marketing promotion and training. The latter is grant aided to a maximum of €10,000 at a rate of 40%. Under exceptional circumstances, grant aid of up to €100,000 was available. The LEADER programme was replaced in December 2006 by a similar programme set up and funded by the Department of Community, Rural and Gaeltacht Affairs. It is a more streamlined version of the LEADER programme in which Three funding companies have been amalgamated into one under the Departments Cohesion process. The new company, yet to be named, will receive a budget of €10M. Treble the previous amount.

An example of funding sources available from the County Enterprise Boards can be found in the Wicklow CEB where Capital Grants of up to 50% of the cost of fixed assets or €75,000, which ever is the lesser. This is refunded to the board over a period of 5 years at a low rate of interest and is known as a refundable capital grant. It is lent to enable the applicant purchase machinery, equipment, buildings or workshops. Enterprise Ireland’s led Business Angels are a source of finance offered by participating individuals who are described as “informal private investors” and who invest capital in companies during their early stage of development. In addition they contribute their know-how or experience in company management and can offer valuable expertise and guidance. Angels usually seek active participation in the company in which they invest. Business Angels are a substitute for classical bank financing or venture capital, which is often lacking at the early stage of a company’s life. They are primarily motivated by return on investment and Business Angel involvement can often help secure access to venture capital or classical bank loans. The average initial investment by Business Angels range between €25K and €125K. Business Angels generally invest in the region where they live and in areas in which they have greatest expertise/knowledge. They may not necessarily look to invest in new technologies, although some specialise in providing in such areas The business expansion scheme allows individual investors obtain income tax relief on investments in each year to 2006, there is no tax advantage, but involvement in a BES can attract other (external) funding. Tax relief is available for qualifying individuals are for €31,750 in any one year.

A Farm Forest Enterprise Scheme is an option under Teagasc in rural areas, which can be considered provided the following steps are taken. These involve the assistance of an approved forester to prepare the grant application, the option of allowing the approved forester to establish and manage the operation, and the approval by the Forest Services of the applicants grant application.

There are many sources of finance available for the establishment of enterprises in rural areas. This study has concentrated on the creation of new rural enterprises. Some of the sources examined, such as Business Angels or Business Expansion Schemes would also be appropriate to enterprises in urban areas in that they do not necessarily address conditions specific to rural areas which would have an agricultural or environmental element. Other sources are specifically designated to rural areas such as the LEADER plus programmes, co-operative groups or the Teagasc initiatives. These schemes are available to private individuals or community groups. The purpose behind these initiatives is to foster economic regeneration in rural areas. and their overall success must be contingent on their ability revitalise the economic well-being of the communities they are targeted at. There are advantages and disadvantages to all of them the applicant must consider the opportunities presented as well as the drawbacks, such as the bureaucracy associated with these schemes as well as the threat to reduction of state support. Finally it is up to the community and the individuals in these communities to avail of the possibilities offered.

By Paul Leahy. B.Sc. ((Hons.) Rural Development)).NUI Wicklow Irelands premier resource on the beautiful county of Wicklow.

Article Source: http://www.wellnessarticlelibrary.com

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