Diversification Finance: Helping a family to recover from loss and increase their farm income
Sometimes the situation of our borrowers can touch our team more than others. It is the nature of our business that there are times when agricultural finance is sought following a tragedy. Often, this involves restructuring finance to settle debts, but sometimes the finance is also needed for rebirth, and in this case, we were able to support a family recovering from loss and enable them to grow their farm diversification so they could thrive.
What was the situation of our borrowers?
This case study revolves around a tight-knit family with deep roots in their ancestral farmhouse and sprawling property in Devon. The family estate comprises a farmhouse, agricultural buildings, a farm shop and just under 100 acres of farmland, providing numerous opportunities to grow their business operations. They also owned another 100 acres near to the main farm. Following the sad loss of their patriarch, the family, driven by their commitment to upholding the family’s legacy, focused on expanding their diversification plans to ensure the longevity of their farm business.
A Diversified Farming Enterprise
The family’s business operations were diverse, including a thriving grocery delivery service initiated in 2018 that experienced a surge during the Covid-19 pandemic, a herd of Devon Red Cattle, thirty pigs and a farm shop catering to residents and the holiday-letting community. The livestock yield was significant as it supplied their farm shop, creating a sustainable farming model that fed back into their business ecosystem.
The cattle were North Devon Reds, which take a little longer to mature being a native breed but are easy to handle and can be finished on grass and a little hay. This saved them costs on feed as they produce most of their own winter fodder from their own land. Native breeds such as this have also been growing in popularity among consumers, as they are considered to be more environmentally friendly and produce better-tasting beef due to their slow-growing nature. The family purchase the cattle locally, and they take 12 to 18 months to finish.
The family had drawn on the skills of all three of the siblings, including one who had retail experience and therefore was able to oversee the retail side of both the delivery business and the farm shop. Meanwhile, another sibling had an interest in vegetable growing and was able to establish a 15-acre kitchen garden that produced the vast majority of the vegetable products.
The family intended to expand all of their productions with more pigs, more cattle and more vegetables – in the case of the veg, both in quantity and type. Adding an additional delivery van would enable them to reach more customers, and they were also looking to expand their relationships with shops and restaurants in the area.
Financial Situation and Objectives
The family sought financial assistance from UKAF to manage the diverse operations of their business. Their financial objectives included:
- Settling existing business debts
- Infusing working capital into the business
- Expanding their farm shop
- Purchasing a second delivery van
- Increasing the size of their beef herd.
They needed a loan of a little over £300,000 to achieve these goals.
As always, we conducted a site visit with the borrower to better understand their situation and needs. Tracey was impressed by the family’s keen sense of community and commitment to improving local farming and food supply.
We were able to offer a loan for this borrower as we could see the level of preparation they had put into their business plan. They had clearly considered all the potential risks and challenges, and had also considered the alternative routes they may need to take if various challenges arose. This level of preparation showed us that they were high-quality borrowers who understood their business extremely well.
Outcome of the Diversification Finance
With the loan’s approval, the family could repay their overdraft and bank loan, expand their beef herd and strengthen their business’s working capital. This decision marked a significant achievement for the family, preserving their legacy and paving the way for future innovation.
This case, managed by UKAF’s dedicated Business Development Manager, Tracey, showcases the importance of understanding and supporting each client’s unique circumstances and aspirations. It is a testament to the resilience, tenacity and innovation within the UK’s farming community, highlighting the value of specialised lending in the agricultural industry.