Farm debt, time to review?

“With so much change and uncertainty in the rural sector, now could be an opportune time to review the outgoings required to service your current level of debt,” so says Andrew Connah, head of rural finance at Balfours.

He says that reflecting upon the fortunes of UK agriculture over recent years brings into sharp focus how all sectors of agriculture can now be associated with the boom-bust cycles of fortune that were perhaps previously associated mainly with the 3 P’s – Pigs, Poultry, Potatoes; traditionally the only sectors which did not receive direct price support. Andrew suggests: “Now all sectors must expect to see much more variation in annual profitability and cash availability for debt servicing and re-investment.

“In my experience, when times are profitable and cashflow is strong it is often considered good practice to reduce debt levels quickly. However, the recent pace of such changes suggest it can be wise to constantly review the structure of debts, so that you are not committed to such rapid repayment but retain the ability to repay more quickly when cashflow allows.”

He outlines that as agents of the Agricultural Mortgage Corporation, Balfours can assist in accessing finance which can often have the following unique benefits:

• Repayment loan terms of up to 30 years – so spreading capital repayment over a longer time and hence reducing monthly outgoings.
• Long term interest-only loans enabling time specific opportunities, like buying neighbouring land, to be more comfortably affordable while existing debts are repaid.
• The ability to make additional capital repayments (on variable rate loans) without incurring fees or penalties.
• Long term fixed rates – to remove the uncertainty of the future of Bank of England base rate.
• A commitment for the term of loan meaning that, provided debt-servicing commitments are met, there will be no reviews of the decision to lend or the terms of the loan.

“Furthermore, if proposals don’t quite meet the criteria for an AMC facility, we have relationships with other trusted lenders, each with their own benefits, to ensure that clients secure the funding needed for the success of their businesses.”

Andrew continues: “Change will undoubtedly bring opportunities for some and, in such circumstances, having restructured your current debt to reduce monthly outgoings means that the same cashflow can service more debt to take on business opportunities with confidence.

For those of a more cautious nature or those who feel that they are already heavily committed, restructuring debt to reducing monthly outgoing can make a future with less subsidy income and more exposure to world fluctuations feel much more comfortable,” he concludes. For a free and confidential evaluation of your business call Andrew on 07538 321201.

AMC loans available for business purposes only, provided on a secured loan basis. Minimum AMC standard loan £25,001. To meet customer requirements, lending criteria will vary. Lending is subject to status.