Farm Diversification Finance: Glamping on a Mixed Farm
The agricultural sector is rapidly changing, and farm diversification is essential for maintaining finance sustainability. Glamping, which combines glamour with camping, has emerged as a profitable farm diversification strategy for farmers. This approach allows them to leverage their scenic landscapes to generate additional income. UK Agricultural Finance supports these innovative transformations by providing specialised agricultural loans, aiding farmers in embracing new opportunities for growth through farm diversification finance.
Background on the Borrower: Legacy and Innovation
Originally established by the borrower’s father in the 1980s as a modest potato farm, the property had seen a significant transformation under the stewardship of our borrower and his wife. With a shared background in farming and agricultural education, they brought fresh perspectives to the farm, transitioning it from a traditional single-crop farm to a diversified farm business with multiple income streams. The farm is now diversifying into more profitable and sustainable ventures, including the introduction of glamping facilities. This evolution reflects their commitment to adapt and thrive in a changing agricultural landscape, aiming to ensure the farm’s profitability for future generations.
Project Overview: Creating a Glamping Haven
The borrower’s glamping project initially involved setting up an enchanting retreat with a mix of teepees and shepherd’s huts, enhancing the farm’s appeal to tourists seeking unique countryside experiences.
Currently, the site features two teepees and one shepherd’s hut, with plans to expand. The teepees can only be used for 8 months of the year whereas the shepherd huts can be used all year round, so there are plans to convert all accommodations into shepherd’s huts to extend their season, this is something which a loan from UK Agricultural Finance can help to facilitate. The borrowers have been clever in their use of capital so far, to keep costs down, they construct and outfit the shepherd’s huts themselves, significantly reducing the up-front investment while still generating substantial annual revenue.
The glamping site also incorporates luxury amenities, including hot tubs, catering to guests’ desire for comfort and exclusivity. The cost of additional teepees or shepherd’s huts is normally recouped within about 2 months of operation, with the borrower’s wife completing all the management, check in, cleaning and changeover processes to further reduce the overheads of the project.
Sustainable practices are a cornerstone of their setup, ensuring an eco-friendly footprint while tapping into the lucrative glamping market.
Financial Journey: Securing Farm Diversification Finance
The borrower initially encountered significant challenges in financing his diversification into glamping. Traditional lenders were reluctant to lend due to their mixture of income sources and the inclusion of less traditional farm income sources like livestock B&B contracts. They struggled to understand the nuances of these contracts and therefore couldn’t adequately assess the risks of the loan.
UK Agricultural Finance, with their deep agricultural knowledge, recognised the potential and innovativeness of the project and provided a tailored solution with a loan exceeding £1 million. This funding was crucial, allowing the borrower to settle inherited farm debts and further invest in expanding his glamping venture, ensuring both debt resolution and business growth.
Impact and Outcomes: Boosting Farm Profitability Through Livestock B&B
The borrower has innovatively integrated a Bed and Breakfast model for livestock management to enhance farm profitability. This model involves raising livestock – cows, pigs and sheep – on behalf of national supermarkets and other businesses under contractual agreements. Under this model, the farmer is paid to care for, house and feed the livestock, and transport them to market for sale. However, they do not own the animals and so are paid for the service of providing care rather than having the risk of buying, rearing and selling the animals outright.
Cows: The borrower raises cows for a national supermarket, feeding and caring for them until they reach a pre-agreed weight. The supermarket pays a fee for each cow raised to the target weight, while the borrower benefits financially from any additional cows that exceed the contract specifications.
Pigs: A recent venture involves a partnership with a company that constructs pig sheds on the farm, financed through a unique lease-to-own arrangement deducted from the invoices. The pigs are then provided by the company and housed on the farm on a B&B basis. They are raised to a specific weight before being sold, with a turnaround that allows for continuous cycles of rearing and selling, enhancing the farm’s revenue streams. Also, this contract will mean that once the sheds have been paid for, the borrowers could either continue to offer B&B pig contracts or could swap to buying and rearing their own pigs as they prefer. To expand on this side of the business, the borrower applied for an IPPC licence which would allow them to raise over 2000 pigs, significantly expanding this income stream.
Sheep: During the winter, sheep are kept on a B&B basis. The contract is based on a total price rather than per head, so the borrower has a specific agreed income from this contract, with costs offset by a country stewardship grant, turning this into a no-loss operation. This arrangement also benefits the land through natural fertilisation from the sheep.
This B&B strategy not only maximises the use of the farm’s resources but also ensures they have diversified income streams, making the farm more resilient and profitable. Each venture contributes to the farm’s sustainability by ensuring continuous productivity and financial returns.
Embracing Diversification in Farming to access multiple income sources
The borrower’s strategic approach to farm diversification showcases the robust potential of blending traditional farming with innovative income streams. Initially focusing on crop farming, particularly rye, which is not only utilised for livestock feed but also sold for additional revenue, the borrower effectively integrates crop sales into the broader business model.
Additional Revenue Sources: Beyond crop farming, the borrower leverages an anaerobic digestion (AD) plant on the property, enhancing energy production and utilising agricultural waste to generate further income. This AD plant is part of a long-term lease agreement, providing a steady income stream while also selling excess livestock waste to the plant operator, showcasing a successful example of circular economy on the farm.
Agricultural Machinery and Grants: Transitioning from traditional to more diversified farming, the borrower optimises asset utilisation by selling outdated machinery and securing grants for new agricultural equipment. This proactive asset management supports ongoing farm operations and reduces operational costs, further boosting the farm’s financial health.
Livery Services: The existing livery services offer another layer of diversification. Future plans to convert these facilities into holiday accommodations indicate a forward-thinking approach to maximising land use and responding to market demands.
This is an excellent example of how farm diversification can be used to help save a farm for future generations. For those in the farming community looking to diversify their operations, UK Agricultural Finance stands ready to support. With tailored financing solutions, we can help transform your innovative ideas into successful realities, ensuring your farm thrives in the modern agricultural landscape.