Finding funding solutions - for the agricultural sectorPublished on 9th October 2019 2019-10-09T11:00:00+00:00 - Last update on 31st March 2020 2020-03-31T14:06:39+00:00
£30,000 loan over 6 months to buy livestock
We were recently approached by a tenant farmer from Lincolnshire for funding. He needed £30,000 to buy a herd of beef animals for bringing on - but he found he faced difficulties in raising the funds he needed.
His usual funding provider - his bank - was unable to advance that level of funding, and many other lenders are reluctant to serve the sector, which they regard as too specialised. Rather than attempting to make a lending decision on a sector where they do not understand the challenges involved, they prefer to leave it to specialists.
However, many specialist lenders are becoming increasingly selective in their lending - particularly to farmers in the livestock sector.
There are several reasons for this. Pressures on livestock farmers are increasing. There is a growing demand for organic standards throughout meat and dairy operations. There are increasing concerns about animal welfare, especially on intensive operations - and this can mean conflicts with the constant pressure from buyers for reduced costs.
This can, in turn, mean that some areas of the sector - including our client’s - are only able to demonstrate marginal profitability. Lenders may be highly selective, even in those sectors that they are usually happy to work in.
In the case of our client, there were several other issues which worked against him when he applied for funding. As a tenant farmer, he did not own his farm or his home, leaving him with no way to provide security for lending.
Perhaps even more important, he had not been a major user of credit in the past. Working as a cash business may have its advantages, but it tends to mean that you will not develop a credit history.
Lenders always look at an applicant’s credit history when considering making a loan. They will want to see a good record of borrowing and repaying in the past, as a sign that an applicant will be able to repay any new loan. A default on a loan may be an absolute red flag for many lenders, who will simply refuse to deal with those who have run into this kind of problem in the past.
However, the lack of a credit history can also cause problems. In the case of our client, because he had never had a mortgage or any kind of business loan in the past, his credit history was almost non-existent. While he was present on the electoral register and had some tax records, most of the usual data used by lenders to determine the suitability of an applicant for a loan were lacking.
Even those lenders who might be able to consider him for funding were unable to proceed without the information required - their systems were simply unable to process the application.
Our client needed the funding quickly to bring in the animals he wanted - he had no other way to generate any profit for his business. He turned to Rangewell to help.
How we were able to help
Our approach is very different from conventional business funding advisors. Whereas many are tied to a few lenders, we are completely independent. This means that we can search the entire business lending market for solutions, and because we know all the lenders in the UK, we know which are the most suitable for any particular finance challenge - including those able to help when the borrowing needs are less than ideal.
At Rangewell we know the specialist lenders who cater to people and businesses who present a credit challenge. Their services are often not advertised, but our network of personal contacts is essential to locate them - and to arrange the funding.
In this case, we contacted one of these specialist lenders and explained the challenges presented by our client.
There were some major negatives. The farming sector was a challenge, as was the lack of owned property. The lack of an established credit rating was even more significant.
However, we were able to approach a long-established lender with close connections to the agricultural sector. We know that they have been able to offer funding for cattle and sheep in the past, and that they might be prepared to do so again.
The fact that our client had a long history as a successful farm operator was a significant factor for this lender.
We arranged the loan, which allowed the farmer to buy in the animals required, and to bring in feed for them - with sufficient surplus funds to deal with vets bills and other costs until they were ready for market.
The loan Rangewell arranged:
£30,000 at 10% over six months
Interest rolled up until the cattle were sold on
Charge for loan £1,500
Finding the one lender who was able to help is all part of the service at Rangewell. To find out more about how we help the agricultural sector find the funding they need - from finance to restructure a farm to funding livestock - simply contact our agricultural finance team.
Share this article
Discover your range of finance. Every type of finance for every type of business.
Our goal is very simple - to help businesses find the right type of finance as quickly, transparently and painlessly as possible.Find Funding