Why would you come to UK Agricultural Finance for livestock finance?

UK Agricultural Finance provides loans for a wide variety of agricultural purposes and businesses. But one area you may not be aware of is livestock finance. We can lend against your property and land assets to provide you with the funding you need to expand or finance your livestock purchases, giving you the flexibility to seize opportunities in market prices as they arrive.

Traditional high street lenders often struggle to assess the value of livestock purchases and hence fail to provide suitable loan options for farmers looking for livestock finance. This was the case for one farming family we worked with who wanted to expand their beef herd.

What was the background of our borrowers?

The borrowers had a family-owned company that was originally involved in property development. They did property development for many years but then chose to use the funds in the company to purchase a beef farm within the Welsh borders. The family then ceased doing property development work and focused on their farming business, which continued to run successfully.

However, their bank struggled to understand this change in company activities, despite their best efforts. Initially, this was not a concern as the family was able to obtain sufficient financing from various sources to renovate and develop the farm, including unsecured loans on cattle sheds and some hire-purchase agreements on machinery.

The borrowers were in their 60s but intended to continue managing the farm for around 10 years and already had a clear and pragmatic succession plan in place should this timescale need to change.

Why did the borrowers need livestock finance?

As the borrowers developed their beef farm further, they recognised a need to expand their herd to further grow the farm business. The borrowers wanted to increase the herd to 1000 head of cattle. This would require additional financing.

They also recognised that their current mixed finance structure had led to fairly high interest costs, and therefore were looking to restructure this debt into a lower-cost interest option. To do this, they required a loan of over £2.5 million and a lender who understood their farm business goals.

Why couldn’t the banks provide a loan for livestock finance?

The borrowers’ bank was unwilling to take a view on the expansion potential of the farm business and didn’t understand the requirement for funding with regard to expanding the herd of cattle. The bank also appeared to still be confused by the company’s history as a property developer, despite this now being a long-past aspect of their business operations.

The bank seemed unwilling to recognise their change to an agricultural business or their current demonstration of expertise in developing the beef farm to its current stage. Due to this, the bank was unwilling to provide any suitable loan options and the borrowers had to look elsewhere.

This lack of understanding from traditional lenders is a common theme amongst most of our borrowers. We pride ourselves on our specialist knowledge and understanding of the agricultural sector, along with our flexible lending criteria that allows us to consider cases without the checkbox approach of many traditional lenders.

What did we see that the bank didn’t?

Our expertise in the agricultural sector meant we could immediately understand the possible need for expansion, including the requirement for livestock purchasing. We then also took the time to understand the borrowers, their background and the historic corporate structure their company had. This helped us to establish that the borrowers were high quality and well-prepared for financing questions such as the need for a succession plan.

We also visited the farm, as we do for all our borrowers, where we were able to assess the potential for the farm to support the desired herd size. This also gave us a chance to undertake a pragmatic assessment of the cost and risk of buying in additional rations for the expanded herd.

While completing the farm visit, we saw that the farm was exceptionally well run, with excellent quality land and buildings. This showed not only the value of the potential security but also the experience and understanding of the borrowers in managing a larger-scale operation.

We also understood that the debt consolidation would reduce their existing interest cost to 75% of what they were currently paying on a blended rate, which would offer considerable savings to the family while also reducing the complexity of their financing situation.

How did UK Agricultural Finance support this borrower?

We were able to offer a £2.7 million loan on higher quality bridging finance over 3 years. This would provide the family with an opportunity to show 3 farming cycles of successful cash flow and income, which could then be used to obtain a refinanced loan with the high street. They also brought in one or two of their four children as directors of the company to demonstrate succession and offset the high street’s concerns over their age.

The Loan-To-Value was well within our limits of 65% at 50% LTV, with security provided by their large farmhouse, farm buildings and around 475 acres of land which was split into various enclosures.

The family was able to successfully use the loan to not only purchase their additional livestock but also to pay off their remaining unsecured debt on the cattle housing and refinance their hire-purchase agreements. All of this helped to improve their position when refinancing to the high street banks.

If you are a farmer looking to expand your herd or flock, why not speak to our friendly team about livestock finance options?

And if you are a broker feeling a bit out of your comfort zone with an agricultural loan you just can’t seem to place, then get in touch today and we can guide you through assisting your borrowers.