We have noticed increasing pressure from Banks towards some clients for whom we work with. I have summarised below a situation that has recently occurred.
My client is unmarried, living at home with his unmarried brother and father. They own their farm and gave up dairy farming four years ago and changed their business model to heifer rearing, field and building rental, relief milking and contract work.
The asset value of the land has been recently valued at £2,400,000 and they have a long-term debt with their bank of £800,000. They have no family to leave the farm to but were facing increased pressure from the bank to repay the loan.
The repayment plan proposed by the bank was short term and the monthly cost prohibitive to their business model. The farmer was at a stage of life not wishing to embark on a new farming system and simply wished to repay interest until they were ready to repay the bank. Moving bank, given the figures provided by the accountant was not an option and we decided to look at alternative funding.
We applied to FOLK 2 FOLK for funding and provided them with the full details of the situation, a business plan and provided them with an exit strategy clearly in place to repay their five-year loan with the sale of assets. The loan was approved, their bank was repaid, and my client is happy in the knowledge that the future is secure and without the stress of having to make large monthly capital repayments.
While this strategy will not be suitable for some farmers it may be a solution worth discussing further.
For more information/discussion, please contact Kevin Edwards at firstname.lastname@example.org or your local FCG office.