It’s no secret that farming is hitting some tough financial times, with the pressure to provide lower and lower customer prices, farmers are feeling the squeeze.
Prices for livestock and produce are falling, and money coming in is falling as a result. Farmers are innovative people though, and many have decided to diversify into other industries to keep up with the times.
But why would you consider a specialist farm loan?
Traditional loans are intended for people to fund a new car, or for retail businesses or offices to purchase new equipment.
Farms are unfamiliar territory for conventional lenders, and as such, they’re hesitant to offer finance, especially if you’re stepping outside of conventional farming – something which has probably been your sole focus for some time.
Add this to their concern about any new business, and the high level of business start-up failures in all industries and you can see why they might have reservations about lending to farmers.
Farmers are always going to find it harder to get a loan based on their existing business because the farm is a business in its own right, and often the equipment or assets there are on a rental or lease basis, meaning there’s no collateral.
How can a loan help me diversify?
Quite simply, a loan is there to help you use your farm to take a step towards something a bit different.
It’s widely recognised that a working farm offers many avenues for a farmer to investigate when it comes to bringing something new to the business, and improving its revenue.
The UK government estimates that diversifying can bring in £10,400 per year for a diversified farm, which is a significant income to channel however you decide.
Your loan is a gateway to get this business up and running. You could use it to make new products, such as cheeses or wool, growing a speciality crop or having a rare breed of livestock, open up a training facility or retail outlet, or converting outbuildings for tourism.
These sort of projects would be difficult to finance without a farming loan.
What can a specialist farming loan provider help with?
Specialist providers like Nationwide Corporate Finance have more awareness of farming and its unique nature.
Generally, diversification loans can be classified into loans for diversification where there is no existing business and loans where there is an existing business.
Funding without an existing business can be trickier because you have no background information available, or proof that you have the skills needed to run the alternative business.
You’ll need to provide a CV which demonstrates how your existing skill set will contribute to the success of the new business, along with a detailed budget and business plan.
If you can provide a chunk of funding yourself or offer security like property or possessions, this will also raise the lender’s confidence and hopefully make the cost of finance more favourable.
Those with a current farm-based business will have a slightly easier ride. Existing accounts and financial history with your bank can be used to show a lender that you’re a competent business owner.
It doesn’t matter if they’re not the cheeriest reading – you can point out where things have gone well, and justify one off spends.
According to the UK Government, about half of all UK farms have diversified into some sort of non-farming activities, and diversification loans for farmers have made that possible. If you’re considering farming loans, UK based Nationwide Corporate Finance are here to get your farm diversification loan started.
