The farming industry is bracing itself for a big change.
We can still report that our contacts in the banks are saying ‘business as usual’. But, there are a few other areas that could impact on farming and the access to finance emerging.
- Land prices – if subsidies go what will be the effect on land prices? Having remained resilient in the past, will land prices remain so? Will any notable decrease in land values see banks tightening their purses.
- The pound - the current boost to some commodities from the lower pound may only be short lived. Input costs are rising and the pound remaining weak. Cashflows will be put under pressure.
- Credit restrictions – there are noises from the USA that consumer debt is rising and the banks aren’t doing enough to check customer ability to service their loans. Could there could be another consumer credit crises in the USA in two years’ time? Some speculators predict that, as in 2007, the UK could follow suit? As Brexit bites, will it become tougher to borrow?
Uncertainty is the current watchword - markets, banks and consumers all hate uncertainty.
What can farms and rural businesses do to prepare for this period of uncertainty?
- Benchmark existing enterprise performance
- Explore alternative enterprise opportunities
- Review your budget regularly
- Look at restructuring your finance - review your arrangements. Is it time to fix? Move hard-core overdraft onto a term loan?
- Talk to your bank - seek assurances of support.
- Shop around with other lenders - when did you last look at alternatives?
- Bring investments forward - consider investments sooner rather than later.
- Seek specialist help – a fresh pair of eyes looking at your business can often see opportunities that others close to the business may have missed.
Farm businesses will need to become financially resilient to weather the stormy and uncertain years ahead. But they also need to be ready to act fast when new opportunities arise, and have lending facilities already in place, or at the least can get finance quickly.
R&BS has a team of consultants with over 100 years of combined agricultural banking experience. We can work with you to review your banking arrangements and check they are structured efficiently. We work with farmers, the agricultural teams of the high-street banks, mainstream rural lenders and alternative lenders every day. We know what is a good interest rate margin or overdraft fee and can negotiate with your existing bank or alternative banks on your behalf.