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Diversification pushes up farm borrowing

Farmers looking to safe guard their business has resulted in borrowing reaching record levels.

Ben-Compton-Bruton-Knowles

Ben Compton of Bruton Knowles

Experts from the rural team at Bruton Knowles have been helping an influx of farmers apply for loans which are intended to cover a range of uses from land purchase, loan restructuring and farm investment.

With interest rates remaining favourable, many are now looking to secure new finance before an expected rise, keeping Ben Compton from the Bruton Knowles rural team busy in recent months.

With commodity prices remaining low, Ben believes one reason for the rise in applications is as a means for famers and land owners to branch out their operations.

He said: “Many farmers are still looking to diversify their incomes away from pure agriculture and this has resulted in loan applications to convert a barn or invest in a renewable energy project.

“European Investment Bank (EIB) funding was available earlier this year and this also acted as an incentive to invest with rates at an all-time low.

“Looking ahead, farm cash flows will be squeezed towards the end of this year through to next with the drop off in commodity prices across the board.

“Combined with the potential delay of the Basic Payment Scheme payments due in December, many banks are finding farmers wanting to extend overdrafts to see them through the short term.

“There are also signs that interest rates may soon be edging upwards and now might be the time to fix before any significant increases occur, especially for any core long term borrowing.

“In addition, for farmers that are not too highly geared there are still good opportunities to invest on farm to either boost income or increase the value of their capital assets.

“What is key is that farmers think logically on what they want to do should they take out increased borrowings. Just because interest rates are low doesn’t mean it’s a good idea to borrow more.

“However, a clear business strategy and careful planning could reap huge benefits in the medium to long term.

“The best thing to do is to look at all options and seek advice on what action to take. It might be that you don’t need to borrow more money but just re structure current operations. We’ve advised hundreds of famers on what action to take not only securing their future but saving them thousands in the process.”

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