Agricultural finance is the borrowing built around the way a farm earns: long-term lending for land and buildings, asset finance for machinery, and working capital for the months between buying inputs and selling what they produce. Which one you need follows from what you are buying. What makes the decision hard is not the products. It is that a farm spends across 12 months and gets paid across one or two, and that the subsidy a farm could once plan around is nearly at an end.

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The income a lender used to count on has almost gone

The Basic Payment Scheme has gone. Its last year in England was 2023. The delinked payments that replaced it in 2024 are cut by 98% on the first £30,000 and 100% above it in 2026 and 2027, the final year. What a lender assesses now is what your farm earns from trading.

The Rural Payments Agency's own worked example shows what that leaves. A reference amount of £40,000 is reduced by £39,400, to £600.

That matters to a lending decision because of how much of a farm's profit the payment used to be. Across all farms in England in 2024/25, the average net delinked payment was about £13,500, which was around 19% of Farm Business Income. The year before it was around 40%. By 2027, its final year, it will be close to nothing.

Environmental land management schemes were meant to take its place, and for some farms they have. Average net income from agri-environment activities rose from £10,100 in 2023/24 to £21,100 in 2024/25, about 30% of Farm Business Income. But that income is not open to everyone who wants it. The Sustainable Farming Incentive closed to applications on 22 September 2026, because the budget had been allocated. Landscape Recovery is closed too. Countryside Stewardship Higher Tier runs on expressions of interest, and a multi-action agreement needs an invitation to apply. Defra keeps the current position for every scheme on one page, and it changes through the year, so check it rather than a guide.

So there are two farms in front of a lender. One holds a multi-year environmental agreement and can show contracted income with dates on it. The other has nothing to apply for while the schemes are shut, and has to make the case on trading alone. If you are in the first group, put the agreement in front of a lender early: it is the most predictable money on your books, and it is taxed as income like the rest.

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A farming year is one income event, not twelve

Everything about farm borrowing follows from the order in which money moves. Seed, fertiliser, feed, and young stock are bought months before the harvest or the sale that pays for them. A business selling to the public spends and earns in the same week. A farm commits in the spring and finds out in the autumn.

One income event a year also means a bad one has nothing to average it against. Average Farm Business Income on cereal farms in England was £143,300 in 2022/23. Defra forecasts £17,000 for 2025/26, which would be the lowest since the series began in 2004/05. The weather and the subsidy did it together. Limited rain gave poor germination and the summer drought hit crops on lighter soils, so wheat output fell around 6% and barley 22%. The delinked payment fell in the same year.

Defra is blunt about why the swings are so large. Farm income is 'the relatively small difference between total output and total input', so 'small percentage changes in either of these can result in large percentage changes in income'. The same arithmetic that turns a good season into a very good year turns a mediocre one into a loss. In 2024/25, 21% of farms failed to make a profit, and cereal farms, grazing livestock farms in less favoured areas, and mixed farms all failed to generate a positive return on their farming activities.

The practical consequence is that the shape of a repayment matters here as much as the rate. Lending that expects the same amount every month from a business paid in September is a mismatch. The usual fixes are a lump sum after harvest, interest-only through the quiet months, or a schedule built around when stock goes to market. Ask any lender which of those they will write into an agreement. Then ask the question behind it: what does this facility cost me in the months when I am not using it?

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What you can pledge, and what changes if you rent your land

If you own your land, it is the security that long-term agricultural lending is built on. If you rent it, it is not yours to pledge, and what you can offer instead is the machinery, the stock, and the trading record.

That is not an edge case. At 1 June 2026, farms in England owned 6.2 million hectares of agricultural land and rented in another 2.9 million under agreements of a year or more. On the 2025 tenure figures, the most recent Defra publishes, 14% of farms were wholly tenanted and another 31% were mixed tenure.

Which regime you are on decides how much security you have in the land, let alone how much you can borrow against it. An agricultural tenancy agreed before 1 September 1995 is a Full Agricultural Tenancy under the Agricultural Holdings Act 1986, usually with lifetime security of tenure. One granted before 12 July 1984 also carries statutory succession rights. Anything agreed since is a farm business tenancy under the Agricultural Tenancies Act 1995, with the term you negotiated and no more. A lender looking at a secured loan will want to know which you hold before it looks at anything else. If you are buying land rather than borrowing against it, that is the subject of our guide to agricultural mortgages.

Your own balance sheet probably changes what problem you are solving. Average net worth per farm in England was £2.5 million in 2024/25, and the average gearing ratio was 11%, which Defra reads as farms having 'large assets relative to their liabilities'. Most farms are not short of assets. They are short of assets that turn into cash in the month the bill arrives. That is a different problem from being over-borrowed, and it needs a different answer.

It is worth knowing what your file says before a lender reads it. iwoca Credit Compass is free. It shows you your Equifax business credit score plus four more scores, what is affecting them, and what to focus on – an instant snapshot of how lenders like iwoca view your company. That is half an hour well spent before you apply anywhere, and not only with us.

One number to keep in view while you weigh any of this up: net interest payments were, on average, 15% of Farm Business Income in 2024/25. Borrowing is already a real line on a farm's profit and loss, and the cheapest version of it is the one you hold for the shortest time.

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Match the borrowing to what you are buying

There is no single best way to finance a farm. Four kinds of spend need four different kinds of borrowing, and what decides it is what you are buying and how long it earns for.

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The first two rows have their own pages, because the terms and the tax treatment take some explaining. Buying land or buildings is covered in agricultural mortgages. For machinery, farm equipment finance goes through hire purchase, leases, balloon payments, the VAT treatment, and what the equipment grants cover. We do not lend secured on land or farm buildings, so on the first row we are telling you what the market does rather than selling you anything.

The bottom two rows are the ones that get left to an overdraft, and they are also the ones a good year hides. Some of it is not a borrowing problem at all. Get the invoice out the day the load leaves, know which merchants pay to terms, and try managing cash flow across the year rather than reacting to it. The rest is a timing problem, and timing problems are what a flexible loan is for.

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Where an iwoca Flexi-Loan fits

If you're waiting on an invoice, a Flexi-Loan can cover the gap, and you can clear it with no early repayment fee once your customer pays.

On a farm that gap is unusually easy to date. You know roughly when the fertiliser invoice falls, when the stock goes to market, and when the merchant settles. Most businesses borrowing to bridge a gap are guessing at the far end of it. You are not, so you can borrow for the length of the gap rather than for a year because a year was what you were offered.

An Flexi-Loan is a business loan with flexible repayment options, and four things about how it works matter when the problem is timing.

• You have 30 days to draw down after approval, so a facility can be agreed before the input bill lands and drawn the week it is due.
• You do not have to take the full amount.
• Interest is charged on what you draw rather than on the limit, so agreeing more than this month's shortfall costs you nothing extra.
• Overpaying automatically earns a payment holiday, which is the mechanic that fits a seasonal trough rather than fighting it.

We also do not secure loans against property, though some lenders do. If you farm rented land, that removes the question that stops most conversations before they start.

The pressure is not spread evenly. It lands hardest on a farm with one enterprise and one income month, because there is nothing else to carry a bad season. That is why the farm types which lost money on farming in 2024/25 are the ones most likely to need a gap covered rather than a machine bought.

It is not the answer to everything. A Flexi-Loan covers a gap between money going out and money coming in. It does not fix a year where the crop failed and the costs still have to be met. And if you are buying a machine that will earn for a decade, asset finance against the machine is usually cheaper.

Flexi-Loan in action: Dovetail and Slate

A seasonal dip put pressure on cash flow, and founder Guy Walker needed funding to cover VAT, salaries and supplier bills until revenue picked up. He bridged the gap without committing to funding for longer than he needed, repaying as cash flow recovered.

Read Guy's story