Where there is political indecision, people sit on their hands, but, with the election now behind us and a Conservative majority in Parliament, things are starting to happen. We’ve had more enquiries in a two-week period than in any two months last year; since the election, there is a realisation that the country can now move forward.
We have seen investment slow down considerably since the EU Referendum in 2016, which has resulted in pressure building on farmers to allocate fresh capital. Now, with the renewed confidence, this has triggered a spate of interest in new loans this year. Farmers still face considerable uncertainty given the complexities of Brexit and emerging trade deals, but they can’t put plans on hold indefinitely.
Farming requires high levels of investment and the lack of sufficient funding is a major threat to these businesses and their prospects. Following the financial crash, many traditional sources of farm finance have disappeared. There is a gap in funding. We believe that most high street banks having reduced lending and lost their specialist agricultural teams, while many new lenders and challenger banks find the sector too complex.
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However, farm finance is an attractive sector for brokers as competition is limited, loans tend to be large and can be secured against real assets. Brokers who are able to access specialist business lenders can really help their clients build their enterprises.
Restructuring finance is one big area of interest, with farmers exiting high street loans into something more suitable for their circumstances, which provides flexibility, a quick and reliable response, as well as a genuine interest in helping farming businesses. As an agricultural specialist, we can offer a strategic view on lending, compiling a tailored option, rather than the off-the-peg packages offered by mainstream banks.
Other areas in which farmers are seeking to invest in include renewable energy projects, farm expansion or improvements, land acquisition and diversification.
What should a broker look for when sourcing agricultural finance?
Firstly, it’s important to work with specialist lenders who understand the complexities of agricultural finance. Brokers should also look for opportunities where a farmer can demonstrate a loan is affordable and has a credible plan to repay it without relying on subsidy payments.
The future of our farming landscape is yet to become clear and farmers will need advice as they look to introduce new revenue streams and underpin their existing farming enterprise. Brokers who have good relationships with specialist lending teams and farmers will be ideally placed to secure repeat business, and to help identify the best financial solutions for this vibrant and highly attractive sector.