When did you last challenge your bank? asks Rob Bishop

The banking sector remains committed to agriculture with lending to the sector rising to over £18 billion in 2017. (Figures released by the Bank of England).   Despite this desire to support the sector not every farming business is getting the best possible deal they could, many have scope to reduce their borrowing costs significantly or change the structure to one that better fits their individual cash flow requirements.

For many changing or challenging your bank is only done when a major transaction such as a land purchase or a requirement for significant working capital is required.  Instead, many choose to take the fee and interest margin quoted by the relationship manager at the annual review as the best or the market price.  Since establishing Woolley & Wallis Finance in July 2014 the firm has brokered over £100m of lending to the agricultural sector which enables them to understand what good looks like and what each business might be able to save if they approached their bank as for any other supplier of goods.

The cost of borrowing is determined by a number of factors;

  • Term of lending (how long you want the money for)
  • Cash generation (how strong your accounts are)
  • Management quality and experience
  • Security
  • The cost of each banks capital

Whilst you may assume that the above are factors that cannot be altered, the cost of borrowing money is like any other supply of goods, in that a price quoted gives the supplier a desired profit margin.  When challenged most lenders have room to manoeuvre and perhaps do not always offer their best price to existing customers.

As brokers Woolley & Wallis Finance prepare a detailed application to potential lenders highlighting the purpose of the funding requirement, the structure that is desired and is right for you the applicant (not the best fit for the bank). This accompanies a financial projection demonstrating how the debt will be serviced and repaid.

By doing this they will look to offer you the best chance of success (removing the risk of a bank manager not understanding your business).  Once the above is completed they are then able to get you the best possible rates and the structure that suits you be it 30 year repayment or interest only through to overdraft, development or bridging funding.

One client approached Woolley & Wallis Finance last year with existing debt of £1.5m and a very strong balance sheet with robust trading performance. By going through the process outlined above and creating competition they were able to reduce the interest margin by more than 1% per annum.  Saving the client £15k per annum or circa. £175k over the 20-year loan period without even changing banks.

As specialists in brokering agricultural debt they understand how best to present you and your business in the best possible way to achieve you the most favourable result.  If you would like assistance in raising additional finance or just a second opinion on your existing facilities call Woolley & Wallis Finance without commitment or obligation.

 

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About The Author

John Swire - Deputy editor of Agronomist and Arable Farmer as well as responsibility for the Agronomist and Arable Farmer and Farm Business websites. After 17 years milking cows on the family farm John started writing about agriculture in 1998 and has since written for a variety of publications and has developed a wide circle of contacts within the industry. When not working John is a season ticket holder at Stoke City and also of late has become a fitness freak, listing cycling, swimming and walking as his exercises of choice.