Given the uncertainty of the effects of Brexit on the agricultural community in the UK there has been an increase in the rural community looking at diversification strategies as a way to buffer the potential loss of subsidies.
One of the challenges however is that following the financial crash funding the agricultural sector is difficult and the government has recognised that “farming requires high levels of investment and the lack of sufficient funding is a major threat to these businesses and their prospects”.
Farmers able to access specialist business lenders will allow them to build their businesses.
The trend towards diversification was highlighted in Luke Johnson’s Sunday Times article ‘Old MacDonald had a farm – and now he needs to diversify‘when he pointed out that “almost two-thirds of farms derive some revenue from non-agricultural sources. The most common activity is letting spare property or developing it for sale. The second most popular form of diversification is renewable energy.”
The choices for diversification are vast with “the range of innovative start-ups appearing on Britain’s farms is astonishing. From caravan parks to kennels, farm shops, bed and breakfasts, cookery schools, wedding venues, shooting estates, green burial grounds, natural beauty products, niche food makers, breweries and vineyards, there are many dozens of possible sectors and uses to which farms can be put,” says Luke Johnson.
In addition to the more traditional routes of diversification such as renewable energy projects, property development or the buying of additional land or increasing the size of a herd to leverage greater economies of scale, UK Agricultural Finance believe that embracing technology as a way of driving improvements and yield will be one of the significant changes of a world preparing for Brexit and beyond.
They have lent money to farmers for:
- Diversification, farmers need capital to diversify and build new businesses
- Purchasing new farmland when additional acreage or a unique property opportunity may come available and often at short notice
- Property finance allows farmers to develop, renovate or repair property for capital appreciation and income generation
- Renewable energy projects can be a great source of additional income and add real value to under-utilised land on a farm, or even turn waste products into revenue
- Livestock Finance is utilised by farmers to expand their livestock holdings
- Recovery and Restructure finance is needed when financial pressure is acute, and a facility can provide a window to take control and rationally plan
- Tenant farmers often have a right to buy their land
- Generational Transfer when farmers who are looking to transfer their farm to the next generation can use a facility to achieve this
What do farm loans usually cost?
- Agricultural bridge finance loans are in the region of 1% a month
- Term loans which are typically three to seven years are in the region of 6.5-8.5%
Rural property and rural businesses is a highly specialist area given the many challenges that farmers face, but don’t forget their appeal.
It’s important to work with lenders who work with the leading experts in agricultural valuation, security and restructuring to ensure swift informed and fair decisions and face to face underwriting.
Finding a lender who only lends against the agricultural sector is key given the complexities of the sector and the need to move swiftly to provide ﬁnancing and the ability to adapt a loan to suit the borrower’s circumstances.
UK Agricultural Finance is an enthusiastic supporter of farm diversification and is experienced in providing farmers access to capital to diversify, sustain, grow and improve their businesses.
by Robert Suss, co-founder of UK Agricultural Finance