Monday, 30 July 2012

Funding for Farmers

During these straitened times, we often hear that one of the main concerns for businesses is the difficulty of borrowing money, but for farmers this is probably less of a problem than for other sectors of the economy. This is because farming has generally prospered in recent years as commodity prices have risen; this has been reflected in higher farming profits, except perhaps in the dairy industry, and soaring agricultural land values.

Consequently banks are more confident to lend to farmers although even then it has to be said they are certainly not lending indiscriminately and are looking at every business case very carefully. In this context I have had a reasonable amount of experience drawing up both business plans for presenting to banks and carrying out valuations to support lending proposals and what is clear is that money is being lent but only on the back of good businesses. Even then the interest rates being offered are much higher than they were four or five years ago despite the historically low Bank of England 0.5% base rate The reason for this is that all banks have had to widen their margins to increase the capital they hold in order to put themselves in a stronger position to withstand another financial crisis without having to be bailed out by central government. Thus it must be of significant interest to hear that one bank which specialises in lending to farmers, the Agricultural Mortgage Corporation (AMC), has negotiated access to a multi million pound European Investment Bank (EIB) investment fund which can effectively subsidise eligible loans with a significant discount of 0.65 % off the AMC’s normal loan margin.

"Our access to this fund allows us to effectively subsidise loans for a wide range of farm improvement and diversification projects including building works and livestock housing, machinery and equipment purchases, farm shops, milking parlours and farm energy schemes. The total fund pot is limited and we have already seen a good level of interest. Farmers with a particular project in mind are urged to contact their local AMC agent," said Jonathan Allright, Head of AMC.

As one such agent I would suggest this scheme provides an opportunity for farmers who are considering expanding or investing in their farm to access favourable loan rates at a time when interest rates are already historically low. I see it as an important tool to help reduce the effects of price fluctuations and input cost volatility.

The minimum amount borrowers can apply for in the scheme is £25,500. The discount is available on loans of up to 10 years for projects that have a definite start and end date and must complete their loan by December 2013.

A wide range of projects within the scope of the scheme and I suggest farmers should consider using this funding to strengthen their farm business for the long term. Indeed with the demands to produce food for a growing world population increasing, this funding offers a real financial boost at an important time for many farm businesses Should anyone have any queries regarding this scheme please contact James Stephen.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381

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