Who holds the purse strings?

A personal touch is best when borrowing money – especially in farming, says Clodhopper

When money is tight, what’s the best way to secure adequate borrowing? With finances forever going upwards, how should farmers best ensure their requirements are met over the next few years?

Looking back, it was the traditional high street banks that secured the lending to most farms. One particular bank I used – and still do today – had a production line of local managers. Most were well liked and easy to talk to.

The annual visit from my bank manager seldom mentioned farming – which I always took as a good sign. One particular manager who retained the job for many years, simply asked as he left the office: “Same overdraft facility again next year? 1% over base?”

Changing times

I was always grateful for his support. The thought of switching to another lender never crossed my mind. But in conversation with a large potato grower recently, it seems that times have changed.

A one-size-fits-all overdraft is no longer the norm. Instead, specific lending for specific jobs seems to be the trend. The names of some lenders will be unfamiliar but some frequently top the best buy tables for savings rates and loans.

More importantly, they are covered by the financial services compensation scheme in the same way as the traditional high street banks. But for the old-fashioned farmers still out there like me, there are no annual visits or walk in appointments.

Their offers are often on sale for only a few days at a time. Often they are only available online – or worse still, need to be downloaded on a smartphone app. Some of these lenders do not even have a customer service number.

Savings and loans

The world is changing – and it is all too much of a concern for me – yet some people are prepared to invest their life-savings or run their business current accounts with these unfamiliar lenders.

At least one bank offers savings and loans to match the seasonality of the farming calendar – recognising that farm income is often spread unevenly across the year, rather than an equal amount each month. But they are not on the high street.

Farm credit is offered so farmers can buy inputs when they need them – and then pay when their cash flow allows. You must meet certain criteria, and have successfully traded with approved suppliers for at least three years, but it seems a good idea.

Banks need to better understand how farming works – both from a business point of view and in practical terms. Some lenders at least appear to be doing so. But it is important farmers know their own obligations too when borrowing money.

No loyalty

With interest rates on the rise and land frequently used as security, it is important for many family farmers that land values hold their own. After all, the last thing they need is for banks to question their net worth start to call in loans.

Some larger farms – if indeed that is what they still call themselves – have found a way to secure lending without actually farming the land. They diversify and contract out any work – yet still make a living by going from one lender to another.

These days loyalty to one bank or allegiance to a single lender is no longer the case. That is perhaps unsurprising given that the one thing I know for sure is that my old bank has lost its personal touch.

Many familiar faces have gone and the only way to speak to a person is via the call centre. My local agricultural specialist has long gone – in fact there is no one local at all. And if you need to re-finance, the lowest rates are not always the best rates.