Farm loans and agricultural finance

From livestock to equipment, farms are expensive enterprises to run. Finance can help alleviate cash flow shortfalls and make investing in the business more realistic.

By Matt Ayres on 17/06/2019

Farm finance can be good for buying bulls or stocking up on seeds | iwoca

Whether you own a plot of agricultural land or already run an established farm, it’s likely that you’ll need cash to fund any plans for expansion.

That’s where finance can help. But with a range of farm loans and agricultural finance options available, it can be tricky working out where to turn when it comes to acquiring money for the growth your business.

Perhaps you need an extra reserve of cash to invest in livestock, or would like to invest in a pricey piece of machinery that could revolutionise the way you use your land. Whatever you need finance for, there are a variety of alternative business funding options to suit your business. Here are a few to consider.

Asset finance in agriculture

There are two broad categories to consider when it comes to asset finance. One involves taking out a loan to fund new assets, while the other uses existing assets as security to borrow cash for other areas of your business.

The former option (sometimes referred to as equipment finance) can be a good option for farmers looking add new assets to their business, such as vehicles, buildings or equipment. These are expensive items to fund with savings, and doing so could prevent you from using working capital in the day-to-day running of your business, cause cash flow problems and put the financial health of your operation at stake. Taking out an agriculture loan with a low interest rate could be a more manageable way to acquire the assets you need.

Refinancing an existing asset is the other option, particularly if you already have valuable items in your business that can be used as security for a loan. Again, these assets could include things like farm vehicles, harvesting equipment or even buildings. Indeed, almost anything of value can be used as security, as long as it is considered removable or re-usable by the firm using it as security against the loan.

Finance for livestock

Investing in livestock is an important consideration for many farmers. To make the most of market demand, increase production and ensure the continued genetic health of your livestock, it’s vital to have the cash to buy animals when you need them.

However, livestock isn’t cheap. Whether you’re farming chickens, sheep, pigs or cows, the costs associated with acquiring new animals can quickly run into the thousands. Not all farmers have money spare to acquire new livestock when they need it. As such, many hold off on investing in livestock and other assets, potentially to the detriment of their business.

Finance can provide a lifeline, freeing up cash flow in other areas of your business and allowing you to make quick decisions. By taking out a small business loan with a low interest rate, you can invest in the livestock you need to capitalise on customer demand without paying over the odds for the finance you require.

An unsecured loan also removes the need for assets to use as security. If you can demonstrate a reliable trading history, it can be a simple way to acquire finance for investing in livestock.

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Finance for agricultural land and farms

If you’re seeking finance to buy agricultural land or farm buildings, you might consider taking out an agricultural mortgage.

Mainstream banks and building societies might be the typical choice for a mortgage on a house or conventional business premises, but for farmers finance can be trickier to acquire. Luckily, a number of lenders specialise in providing mortgages and loans for the agriculture sector, accommodating farmers and land owners who are looking to expand.

Leasing farm buildings such as sheds, barns, shelters and silos can also be an attractive option for some farmers. A lease with the option to purchase the building at the end of the contract can be a flexible way for farmers to spread the cost of an expensive asset, without losing out on the new business opportunities that the investment might present.

Can iwoca help?

At iwoca, we offer finance options to small businesses of all types, including farms and agricultural businesses. Our decisions are based on a business's previous performance, so you don’t need existing assets to use as security. It takes less than 10 minutes to apply, and if you’re successful, the funds can be in your account within 24 hours.