Farm Financing Up To £25M

As economic uncertainty in the UK deepens in the wake of Brexit & the coronavirus, rural communities are increasingly looking for new ways in which to diversify & expand. 

Agricultural industries have been heavily reliant on subsidies provided by the EU's Common Agricultural Policy (CAP) in the past, & these revenue streams are no longer certain in the wake of Brexit. 

Farmers must look to alternative forms of income now in order to lay a solid financial foundation that will protect their business should there be a loss in state funding. This diversification could provide a long term solution that will boost profits significantly & help secure the future of the farm in the long term. 

However, in order to make these changes, farmers may need access to temporary cash facilities that they can use to invest. This is where farm financing can help.

What Can Farm Financing Be Used For?

Some of the scenarios where these farm loans can be used include:

• Diversification
• The purchase of new farm properties, or additional farmland with a farm land loan
• Expanding livestock holdings
• Installing renewable energy
• Repairing, restoring, or developing existing property
• Buying land that is currently rented by the farmer
• Cash flow boost to ease any current financial pressure
• Generational Transfer - transferring a farm from one generation to the next

Accessing Farm Finance

Because of the current uncertainty faced by the agricultural sector, accessing traditional forms of finance can be a challenge. In fact, many traditional lenders are wary of lending to any business in this area at this time, because it is hard to confirm that financial projections are realistic & verifiable. 

Agricultural finance is a form of bridging loan that is available to farmers that makes it relatively easy for them to access the finance they need to protect their long term future. 

Bridging loans are short-term loans that can be used to temporarily ‘bridge the gap’ between other forms of lending when farmers require fast access to a certain amount of funds. 

They have slightly higher interest rates than other types of lending, but are must faster to apply & be accepted for, making them ideal for any short term financial requirements.

Agricultural Finance Vs. Bridging Finance

On paper, agricultural finance is a form of bridging finance. However, the two types of lending are separate - farm finance is not just another name for bridge loans. 

Agriculture-specific lending has very different requirements & has more stipulations than other forms of bridging.  This is why it is useful for farmers to find a knowledgeable & skilled agricultural loans broker in order to source farm financing that is tailored to their needs.

Why Use Farm Financing In Agriculture?

Agricultural businesses expect to have some fluctuation in profits & growth depending on factors such as the time of year, weather conditions & market performance. 

Bridging finance offers an excellent opportunity for this type of business because:

• Farm loans are fast & can be arranged in just a few days
• Agricultural finance can be used for a wide variety of reasons
• Loans are flexible & can be tailored to the specific requirements of the farm. Terms can also be extended, & interest rolled up
• Borrowers can apply for loans that range from £25K to £25m
• Agricultural loans can be secured against almost any asset, including as second charge mortgages that are taken out against a property which is already mortgaged

What Does Farm Financing Cost?

As mentioned above, agricultural loans tend to have a higher interest rate than other types of loan, & this is because they are meant to be used purely as a short-term funding solution. The amount that you will pay back to a lender will reflect the amount you have borrowed, the lender you choose & the strength of your exit strategy. 

A bridging loan will usually be borrowed for a period of between 3 & 24 months. Interest on these loans is charged by the day, & typically costs around 1% of the total per month. You should be aware that some lenders charge fees on top of this, such as arrangement fees of around 2%, or exit fees of around 1%. 

We can help you to find a lender that best suits your budget & will ensure all the costs of any farm financing you require are transparent & up front.

To see our indicative bridging loan rates & costs you can use our bridging loan calculator here

What Fees Are Associated With Farm Financing?

There are numerous fees associated with bridging loans, & this can be confusing for those new to the process. Fees are typically broken down into:

Lender Arrangement Fee

This fee is usually added to the total cost of the loan, meaning that borrowers don’t need to pay it upfront, although some lenders will ask for a proportion of the arrangement fee as a down payment as an indication of the borrower’s commitment to the loan. Lender arrangement fees are usually around 1-2% of the loan.

Broker Fee

The majority of brokers will charge a fee of around 1% for arranging farm financing, & this will become payable on completion of the loan.

Valuation Fee

The valuation fee is almost always necessary to pay in order to progress your farm financing application for property finance, as it assures the lender that the property, land, or equipment is suitable for the loan. This fee pays for a basic survey & is only really suitable for informing the lender. 

Legal Fees

Legal fees pay for the legal representation required by most lenders to complete a loan, which the borrower will pay for. Some lenders will allow each side to use the same solicitor, saving the applicant time & money.

Exit Fee

An exit fee is usually equal to one month’s interest or 1-2% of the total cost of the loan, paid to the lender on completion of repayments on the loan.

Some lenders may charge a lower interest rate but their fees may make the cost of the loan over its lifetime a lot more than other lenders. Using a specialist agricultural broker to arrange your finance means you can rely on their expertise to find you a loan which offers the best value overall. 

Apply For UK Farm Finance With Us

Before applying for farm finance it is best that farmers do some research to show that the investment they intend to make will be successful & demonstrate they will be able to afford to pay back any loan they need. Lenders will want to see a solid business plan that outlines an exit strategy that seems workable & realistic.

An exit strategy could be income-generated from an expanded farm, rent from a property or land, or even longer term refinancing.

As an example, a farmer who wants to expand their farm may decide to purchase more land at auction. A bridging loan will give them the instant capital they need to go ahead with that sale, after which they can arrange a longer-term mortgage on the property or land & then pay back the bridge loan using those funds.

We're a specialist farm financing broker & work with lenders who understand & are experienced in the agricultural industry to search the market & locate the best rates and deals available. Can we offer guaranteed farm loans? We will certainly try our best, & with access to over 100 lenders it’s very possible we can source you the agricultural finance you need. 

Just call 01202 612934 or complete our Quick Enquiry form to make a start on your application today!