Over the past 12 months, we have been busy putting business plans together for clients looking to borrow money for various on-farm projects; this has ranged from cubicle sheds, parlours, bridging loans for grant funded projects and more general re-financing of existing borrowing.
In many cases, the farms existing banks have been keen to support the various projects but with hugely varying interest rates (typically 1.6% over base to 7% over base). Often, the projects being undertaken are part of an investment plan for the next generation to ensure the farms have a long-term future. However, the likelihood is, the next generation is also saddled with the borrowing linked to a high interest rate, not exactly the best way to start out in business!
Working closely with the clients and drawing on the strong relationships we have with local bank managers, significantly lower interest-rate loans have been secured, often by changing to another lender.
An example of one tenant farmer:
£215,000 borrowing required for new cubicle shed, parlour and conversion of the old shed to loose housing, no security was available and both banks were presented with the same business plan:
Current bank – £215,000 @ 6.8% over 10 years – £29,690 capital and interest per year
Bank B – £215,000 @ 3.3% over 10 years – £25,271 capital and interest per year
The decision to ask a second bank to quote for the borrowing has achieved a saving of £44,192 over the term of the loan for this client.
As consultants, we strive to provide value for money to our clients. By challenging the prices of those supplying different services to our farmers, we have the ability to save significant sums of money.
To discuss your plans for the future or to see if we can secure a better deal on your borrowing, contact Andy at firstname.lastname@example.org or call your local FCG office.