What Types Of Farm Financing Loans Are Available?

Commercial ventures always come with a level of uncertainty, but the farming industry can be a particularly risky business. Just a month of poor weather can affect an entire year’s crop, a piece of expensive machinery can break down without warning or a sudden change in global food markets can send profit margins into freefall.

In make or break situations like these, farm financing can provide farmers with short-term access to funds to help sustain their business & cushion any unexpected blows. Farming can be a volatile industry & the ability to acquire short term agricultural finance allows farmers to react swiftly to these situations.

Farm financing comes in a variety of forms, but one of the most commonly used types of finance is called an agricultural bridging loan. This is a specialist loan which can be used by farmers & landowners to secure swift access to funds in as little as three working days.

These farm loans are extremely flexible & can be used to meet a range of short-term needs. Take the example of livestock – for farmers wishing to take advantage of a good year, this type of agricultural finance is ideal as it can enable them to upscale the size of their herd at relatively short notice. Similarly, arable farmers needing to invest in new machinery can use agricultural bridging finance to help fund the purchase. 

Brexit & Covid19 are also causing disruptions in supply & demand throughout the industry & across society as a whole, meaning desperately needed orders can be cancelled last minute & essential supplies can increase in price without warning, causing cash flow chaos to farmers who may already exist on a financial knife edge. Farm loans can be of huge benefit here, as they can be arranged very quickly, often within 24 hours.

The duration of a farm loan is usually a period of one month to two years, which a certain level of flexibility depending on the borrower’s circumstances. Of course, every farmer’s needs are different & that’s why lenders will create a bespoke package of farm financing which is tailored to their individual situation. 

As such, all requests for agricultural bridging loans will be considered on a personalised, case by case basis. To see if you are eligible, please contact us here for assistance.

How Are Agricultural Loans Secured?

Farm loans are typically secured against agricultural land or property, with the size of the loan dependent on the value of the borrower’s assets. Because of the nature of farming & the level of security generally on offer against the loan, lenders are often willing to offer farmers quite large amounts – sometimes up to £25 million – which makes bridging loans a great option for many farm-related purchases.

Lenders will also expect a clear idea from the outset of how the borrower intends to pay back the loan – an agreement otherwise known as the ‘exit strategy’. This re-payment agreement might be a long term financial solution such as a mortgage against the property, or it could be a clear idea of expected future income.

How Are Farm financing Loans Paid Back?

Repayment plans for agricultural finance can be customised to the borrower’s individual circumstances. Monthly or quarterly repayments are just some of the options, while some borrowers choose to defer all their payments under the end of the loan term – a process known as “rolling up”. 

This flexibility gives some breathing space to the farmer or landowner borrowing the funds, allowing time for the business to get back onto its feet again.

How Much Do Farm Financing Loans Cost?

Bridging loans can cost more than traditional loans, which reflects the scale & short-term nature of the lending, & some lenders may charge an arrangement fee for setting up the loan. However, the interest rates for bridging loans are generally fairly reasonable compared with other forms of short-term borrowing. 

To find out what the costs of your financing will look like, please use our quick & easy agricultural finance calculator.

What Are The Different Types Of Farm Financing Available?

Farm bridging loans can be used for a range of different purposes. They are a versatile form of funding & these are just some of the situations where this type of agricultural finance can be put to good use.

Agricultural Land Loans

Farm loans are a popular option for farmers & landowners who are looking to buy agricultural land or property. 

Farm Equipment Financing Loans

Farming machinery generally comes with a hefty price tag & in most instances farm financing is needed to cover the purchase of specialist kit. Farm loans can be used to finance items such as tractors, harvest machinery, livestock handling systems, irrigation equipment & more. 

From just one piece of equipment to an entire fleet of machinery, this is a popular option for farmers & landowners looking to finance their big purchases.

Agricultural Finance Loans For Farm Diversification

Diversification is fast becoming an important part of many farming businesses to increase their profit margins & secure their long term futures. 

Farms & land owners can use the income from farming finance to swiftly change the direction of their business – whether that’s by adding a café or visitor centre or turning the farm into a visitor attraction. 

Agricultural Finance Loans For Emergencies

Due to the unpredictable nature of farming, the need for emergency funding can sometimes appear out of nowhere. To help with recovery & restructure, agricultural bridging loans can provide urgent funds, sometimes with as little as 24 hours’ notice. 

The speed of this process can help the farm recover from unexpected emergencies quickly & get back on its feet before a problem could become a crisis.

Agricultural Property Refurbishment Loans

Farmers & land owners can use bridging finance to carry out renovations or repairs to their property. In the long term this can help increase capital appreciation on these assets and generate future income. 

Transferring The Farm Through The Generations

Traditionally, many farms have stayed in the hands of the same family for generations the land & assets are passed down through the family lines. In most cases, when farms are passed on from one generation to the next, the cost will be lower than the market value. 

A farm bridging loan can help make this a smooth process for everyone involved, by allowing the current owner to take capital from the farm while providing a reasonable sale to the next generation of family famers.

Farm Financing For Livestock Purchasing

For many farmers & landowners, livestock is one of the business’s most tangible assets. Borrowers can use an agricultural bridging loan to purchase more livestock & increase these assets. 

With this much flexibility does come a bit of complexity & knowing which lender to approach & how to structure your proposal for finance can be difficult. Using a broker with experience & knowledge of the sector helps you navigate through this & access the funds you need more quickly than if you approached lenders direct.

We're UK Farm Finance Specialists

With decades of combined experience & access to hundreds of bridging loan lenders, we are able to arrange loans that range from £25k to £25m in as little as 24 hours.

With interest rates from 0.44% & our experts available now, please call 01202 612934 to discuss your farm financing requirements with our friendly team, or send us a Quick Enquiry to get the ball rolling.