Banks are still keen to lend to farmers although the process of getting loans approved can still be quite tortuous as anyone who has recently tried to arrange a loan will be well aware.
However from my recent experience either valuing farms for banks or in helping farmers make loan applications for the Agricultural Mortgage Corporation (AMC), it is clear that competition between all the High Street banks is fierce and we often see “bidding wars” as each bank looks to undercut the other’s cost of borrowing.
The reason banks are keen to lend to farmers is because they generally have a very strong capital base which has been bolstered in recent years by the rise in farmland values. For example in this area we have seen the average value of land rise from around £3000 per acre in 2006 to around £7500 per acre today which is in stark contrast to the residential property market. However revenue returns on farms have not always matched the rise in capital values and this can be the stumbling block, with most banks now more concerned with the serviceability of borrowing than the loan to value ratio.
But in general this is good news for farmers as is the fact that some lending institutions such as the AMC have recently secured additional funding from the European Investment Bank (EIB) which means that for certain loans they can offer discounts on their standard margins of 0.8% which is a significant figure in these days of historically low interest rates.
Such discounts are unfortunately not available for the purchase of land or the restructuring of borrowing but they are available for investment in buildings and other equipment. Therefore if anyone is thinking of carrying out such work they should not only contact their existing bank manager but also consider contacting their local AMC agent to see if they can help.
As AMC agents and valuers, my firm Carter Jonas, like many others is experienced in helping farmers and landowners through the often complicated process of convincing the bank’s credit team that the applicant is a worthy of taking up the proposed loan and in my experience it is the “early bird” that often catches the worm. Therefore if you think you may have a project that would attract the EIB funding farmers are advised to contact their local AMC agent or call me for free initial advice.
However from my recent experience either valuing farms for banks or in helping farmers make loan applications for the Agricultural Mortgage Corporation (AMC), it is clear that competition between all the High Street banks is fierce and we often see “bidding wars” as each bank looks to undercut the other’s cost of borrowing.
The reason banks are keen to lend to farmers is because they generally have a very strong capital base which has been bolstered in recent years by the rise in farmland values. For example in this area we have seen the average value of land rise from around £3000 per acre in 2006 to around £7500 per acre today which is in stark contrast to the residential property market. However revenue returns on farms have not always matched the rise in capital values and this can be the stumbling block, with most banks now more concerned with the serviceability of borrowing than the loan to value ratio.
But in general this is good news for farmers as is the fact that some lending institutions such as the AMC have recently secured additional funding from the European Investment Bank (EIB) which means that for certain loans they can offer discounts on their standard margins of 0.8% which is a significant figure in these days of historically low interest rates.
Such discounts are unfortunately not available for the purchase of land or the restructuring of borrowing but they are available for investment in buildings and other equipment. Therefore if anyone is thinking of carrying out such work they should not only contact their existing bank manager but also consider contacting their local AMC agent to see if they can help.
As AMC agents and valuers, my firm Carter Jonas, like many others is experienced in helping farmers and landowners through the often complicated process of convincing the bank’s credit team that the applicant is a worthy of taking up the proposed loan and in my experience it is the “early bird” that often catches the worm. Therefore if you think you may have a project that would attract the EIB funding farmers are advised to contact their local AMC agent or call me for free initial advice.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
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