What to consider when negotiating a farm or rural mortgage

When reviewing or renewing your farm or rural business finance you must first ask yourselves what are the key drivers or priorities for the business? What are your short and long term business goals and how might your finance agreements help or hinder these objectives?

At R&BS we see clients with a number of different aspirations for their businesses, and they hence have different requirements from their bank finances/loans. For example, after a family change or death where a large loan is required to pay inheritance tax or probate, a long-term deal is often needed to give long-term security and peace of mind that finance costs will not increase.

Each and every client will have slightly different priorities, but the same basic rules will apply to all cases:

• Have you presented the case to the bank or lender in the best way to maximise your chances of securing the finance you need and on the terms you need?
• Don’t always accept your bank or lender’s first offer and terms. Be prepared to challenge.
• Make sure your lender is taking advantage of the various EU funding schemes available, if you qualify.
• Be prepared to challenge covenants, clauses and conditions such as EBIT (earnings before interest and tax) and EBITDA (earnings before interest, tax, depreciation and amortization).
• Only offer what the bank requires in security. Don’t be drawn in to offering more security in case you want to borrow more from the same lender in the future. You then have more flexibility to take on another mortgage, perhaps at a better deal, from another provider in the future.
• Do be aware of penalties for early repayment or lump sum payments. If you want to pay off a large amount after a good trading year, why should you be penalised by the lender?

With many years of experience and knowledge of the farm and rural mortgage market, R&BS can negotiate with banks and lenders where we think there is room for improvement in their offers and terms. We also put clients’ financial applications out into the wider farm and rural finance market, so rather than sticking to their existing bank, the client is getting a choice and the chance to find more attractive deals and the terms most suitable for the future success of their business.

We represent the client in getting the most appropriate farm and rural finance deals. The Financial Conduct Authority (FCA), to who R&BS are licensed, insists on fair treatment for consumers. We abide by these conditions by taking time to talk to our clients, find out what their business needs and helping them to source the finance that best fits the business priorities from a selection of lenders.