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Category: Farming

Whatever new agriculture equipment you need for farming, be it a new tractor or chisel plow, there’s no getting away from how expensive it is. It’s always the case with agriculture equipment that you end up paying more for the best stuff too.

Thankfully, you can have the best equipment for your farm – and it won’t necessarily cost you thousands of pounds upfront. All you’ve to do is finance the new agriculture equipment you need with a specialist lender on a Hire Purchase agreement.

Hire Purchase agreement?

A Hire Purchase agreement is a type of borrowing where the lender purchases equipment for you and you pay the lender back in monthly instalments until you have paid off the amount in full. The lender owns the equipment during the repayment period, so you effectively ‘hire’ it from them. Once you have paid off the amount owed in full, ownership of the equipment passes to you. You are then free to do as you please with it.

Financing agriculture equipment is a smart move, especially with interest rates being as low as they are right now. A Hire Purchase agreement suits many farmers because full ownership of the equipment being financed passes to them once the total finance balance is paid back. Costs can then be recouped by selling the equipment or the farmer can keep hold of it and run it until it reaches the end of its life.

The benefits of Hire Purchase agreement for farmers

In addition to the advantages highlighted above, farmers can enjoy the following benefits with a Hire Purchase agreement through us:

  1. Fixed term: With a Hire Purchase agreement you get to choose the term you borrow over. You can borrow over 1-5 years.
  2. Fixed rate of interest: Your agreement will include a fixed rate of interest. For example, our interest rates start from 3.6%.
  3. Easy to budget for: Because your agreement has a fixed rate of interest, all your monthly repayments will be the same. This makes budgeting for them much easier.
  4. No early settlement fee: If you want to pay off the equipment you’ve financed early, that’s fine with us. We won’t charge you an early settlement fee.
  5. Early repayments are no problem: If you want to pay off more of your balance to reduce the finance term, that’s also fine. We’re flexible to suit you.

What if I have already financed equipment with you?

If you have existing equipment financed with us on a Hire Purchase agreement, you can consolidate your existing finance agreements into a larger one. This will release additional funds and give you the ability to buy the new equipment you need. This is called refinance and it’s the quickest way for farmers to raise capital. Commercial equipment refinancing can also be 100 per cent tax deductible if it’s setup in the correct way.

Call us today on 01234 240155 to discuss finance solutions for agriculture equipment or complete our easy application form to get started.

Owning a business in agriculture brings with it big overheads. Building up a herd or buying more machinery is expensive business, and the funds to do these things are not always forthcoming.

Most businesses will look to finance investment in future projects but of course agriculture faces its own special challenges, so where should you look for finance and how do you go about making sure you submit a successful application?

The obvious place is to go to secure funding is one of the big high street banks but that can be a time-consuming mistake. People often report that they feel the application process is too rigid in its approach and doesn’t take account of the special circumstances that exist in the agricultural sector.

Instead it is probably better to look for a specialist agricultural and farm finance lender to help you put your plans into practice. They will be able to take time to understand your business, what the plans really mean and how they will enhance your enterprise.

It is important to look for a lender that will be able to offer different forms of structures for the loan especially given the volatile nature of agricultural cashflows so look for lenders offering flexible terms, offset start dates and interest only options.

At the same time, it’s worth looking out for a finance house that can give a quick decision and pay out. There’s no point completing an application if it has to wait weeks to go through a credit committee!

So once you’ve found a lender then how do you make sure that you are in the best shape to get a positive answer for your application?

With any deal it is important to think about what you want to get out of it before you start to negotiate so before you even start the application think about what you need and of course be realistic.

Having an up to date business plan is a really good idea and being able to show how the finance fits into your plans is helpful.  For example, if you are thinking about renovating barns into holiday cottages then you need to be clear about how much it will cost and what impact the finished project will make to the business.

You will need to be able to show how you will be able to make the repayments. Your lender will be looking at affordability and making sure you have enough free cash available to make the instalments. Again, it’s important to be clear about what you need. It’s pointless looking for a loan where payments start immediately but the cashflows from a new plant don’t kick in for six months.

At this point it may be useful to enlist the help of your accountant and make sure you have a current set of management accounts and a future cashflow forecast that you can include in your application.

Agricultural finance can be a much needed boost for a business that is looking to expand or restructure. Finding a suitable, specialist lender can make the whole process so much easier and give you the best chance of success.

One of the best sectors for seeing the positive effect that new machinery can make is agriculture, and for most farmers investment in the future is a way of life.

A new tractor can reduce fuel costs and ploughing time, new processing equipment can decrease staff costs and increase quality so better equipment can often be a no brainer.

The question is, what is the best way to pay for your farm equipment?

Finance for farms

If you are lucky enough to have had a good year, then it is tempting to pay cash straight away and indeed there are benefits to this. You know where you stand, the cost is all paid upfront and it’s quick and easy. However, as the old saying goes- ‘businesses don’t die of lack of profit but from lack of cash’ and in a sector that can be as volatile as farming, keeping a good amount of working capital on hand is a sensible move.

Although there are a lot of downsides to arranging a standard form of loan for a farmer, specialist farm finance presents a viable alternative to either paying cash for new kit or not buying at all. The key to getting proper farm finance is to speak with a specialist lender. They will understand how farms work, what their cashflow looks like and have a keen understanding of the business model.

Companies that provide farm finance will have flexible products that will give the borrower the kind of repayment plans that help to make a loan affordable. They can provide loans across the medium term which is ideal for long lived assets such as tractors or combines and can structure the repayment periods so that they fall at the times when cashflow is best.

Although we are looking at a planned investment it is also true that money can be needed at short notice for emergencies. If we think of a breakdown of a tractor or baler at the most crucial point in the farming year and at a time when cash is at its tightest then having access to speedy funds can be the difference between a successful harvest and a disaster.

Of course, not all farmers are owners and although the high street banks may be reluctant to lend to tenants, farm finance is often designed to be appropriate for many different forms of business owners.

Having a lender that specialises in agriculture is a big plus when the application process is in train. It’s not unusual for the finance house to appoint specific account managers who can guide the borrower through the application and who will get to know the business in depth.

The viability of financing equipment for your farm is enhanced when you realise that the interest is tax deductible, making the cost of the finance a lot less than the headline rate.

Farm finance isn’t confined to the large and obvious items of machinery. Specialist lenders will often lend for new lines such as a poultry set up or for the cash flow impact of seed bills. It is even possible to arrange financing for VAT and tax bills when they fall due.

Funding farm machinery and equipment is a commitment that any agricultural business will inevitably need to take in order to progress. When tight budgets and unavoidable external factors come into play, buying new machinery outright can be a tricky investment and one that needs to be carefully calculated.

But on balance, can you afford not to invest in new farm machinery? After all, new farm machinery that could improve efficiencies and dramatically affect your bottom line is worth investing in. Tractors, milking parlors, renewable energy systems and vital production machinery could help you achieve steadier business growth.

When it comes to farm machinery finance, you’ll need to carefully construct a plan to ensure you get the very best out of your deal. Whether you’re considering a tractor finance solution or a funding option for slurry stores, use our five tips below for funding your farm machinery – they will help you to take a firm hold of your cash flow and invest in vital farm equipment.

Current situation assessment

Where do you start when it comes to farm machinery leasing? A good place to get started is by taking a detailed look at your current business performance.

Take a closer look at how your current farm machinery is functioning and analyze how often repairs have been needed. Also, make sure to factor in the cost of fuel and contractors. This will allow you to allocate yourself and your business the budget required to keep your farm machinery in good working order and allow you to estimate how much budget will be required for any extra machinery that may be needed further down the line. You may also want to consider your workforce, and whether any future expansion could affect how and when you consider leasing farm machinery.

Another major consideration to factor into the planning stages is to look closely at your return on capital employed, or ROCE. This refers to the profitability of a business: earnings before any interest or tax is applied, divided by capital employed. This measurement focuses on the efficiency of your assets allowing you to gauge a good comparison of how your farm is performing when compared to another. Use this measurement to your advantage in order to get a better understanding of how efficient your current assets are, and how valuable an upgraded finance agreement could be for your business.

Updated business plan in place

Once you know where your business currently stands, you’ll be able to refine your future plans. By updating your business plans, you will stand in good stead to provide potential lenders and lessors with a credible reason to offer you their assistance. It should also take into account estimated times for your equipment to be repaired or replaced, as well as a detailed outline of any potential business restructures which could impact any farm equipment finance you’re considering, or already have in place.

As part of your updated business plan, you should also consider the depreciation of your farm machinery and equipment. All of these elements that make part of your updated equipment schedule should allow you to get a much better picture of which machinery you will require and at which points – helping you to gauge which farm equipment leasing contract will fit your requirements.

Consider your funding options

Maintaining a certain level of working capital is how you can help your agricultural business flourish. Where farming equipment is bought outright, you may have increased the risk of having to borrow more capital in order to cover unforeseen external factors such as extreme weather conditions. That’s where farm machinery finance can really assist you and your business.

There is a variety of farm equipment finance options available to you, such as hire purchase or finance lease. When it comes to making the decision, it is important to consider several factors:

  • Is it important that you own the asset?
  • Would you rather the asset appear on or off your balance sheet?
  • Do you require flexibility when it comes to paying lump sums?
  • How will you cope if interest rates increase?

After considering these questions, you may still have questions about the details of each possible finance option for your farm machinery. At this point, you may want to reach out to an expert in asset finance to give you all the detail you require before settling on an agricultural finance solution.

Monitor budgets and working capital continuously

Once you have considered all your financing options, and come to a decision on the right deal for you, it’s important to regularly monitor your cash flow. As an established farmer, you may have a very clear idea of your regular outgoings and income, but it always pays to keep an eye on market changes, especially if an external factor comes into play.

With the right farm equipment financing solution in place, you should find that your budget is easy to manage, with payments made over time for the use of equipment.

Get advice from industry experts

If all of this seems like a daunting task to undertake by yourself, all while managing your business on a daily basis, you may want to get the experts in. An asset finance specialist will be able to advise you on all the options you have when it comes to leasing farm machinery. They will be able to take the strain for you – calculating the best approach for you to take from the outset, as well as sourcing the equipment you’re looking for. They will manage the entire payment process and offer you payment installments that will fit in with your business payment cycle.

Please call Nationwide Corporate Finance today on 01234 240155 Apply Online for any farm finance requirement you may have, or just call one of our account manager for a friendly chat.

 

 

 

 

 

Finance can be provided for holiday complexes, caravan parks, caravan sites, properties with agricultural restrictions, land, buildings, working farms, non-working farms, nurseries, garden centers, smallholdings, estates, fisheries, farm shops and generally all types of rural type situations. Borrowing from a farm includes 2 key elements:

Security

The more simple part is the valuation of the security property (ratio and normally set limits which is it important not to exceed. For example, some lenders such as AMC (Agricultural Mortgage Corporation) have a limit of 60% LTV and prefer lending under 50%. This means that if they have security worth £100,000 they will lend up to £60,000. The LTV range between lenders is from 50% to 80%. Normally the lower the LTV the better the chance of success. How much security is offered is, therefore, an important consideration. It is also simpler if the security is free from other loans, however, it is possible to take a second charge so two lenders have a loan secured against the same property with one having a first charge and the other having a second charge. Interest rates for farm mortgages are generally much lower than for other industries and this is generally because there are valuable security and a very safe loan to value ratio.

Serviceability

The second factor is serviceability or ability of the business to repay the loan.

Assessing this involves a detailed analysis of:

1. The Proposal

2. Historic Accounts 

3. Budgets and Cash-flows

4. Background story

 

It is always advisable to informally assess both security and serviceability before approaching a lender about a farm loan.

Please call Nationwide Corporate Finance today on 01234 240155 Apply Online for any farm finance requirement you may have, or just call one of our account manager for a friendly chat.

Farming shows 2014One of the most ancient agricultural shows in the UK is being held during the first week of June. The Royal Cornwall Show has been held every year for the past 221 years.

Located at Wadebridge Showground, it celebrates all that Cornwall’s thriving agricultural industry has to offer and attracts many thousands of visitors, including the Countess of Wessex, who is acting as the traditional royal guest. This year she will be officially visiting in the capacity of the show’s president. Read more »

Common Agricultural PolicyThe EU is working towards a major reform of the CAP, or Common Agricultural Policy. This scheme represents a fundamental underpinning of the European Union and one of its original drivers for the creation of the common market. However, it is also the regions most expensive scheme, which currently accounts for over 40pc of its budget, and it has become a highly controversial one. The Commission came to a deal with MPs and ministers in June last year on proposed changes, but the entire reform package is yet to be fully agreed. Read more »

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