Loan your farm busi­ness needs

Irish Independent - Farming - - FINANCE -

Step 4: Ne­go­ti­a­tion

If you have a strong farm busi­ness and you re­quire a large loan, you are in a po­si­tion to ne­go­ti­ate the terms of your loan, ie the loan amount, term, in­ter­est rate (mar­gin) and se­cu­rity of­fered.

Un­for­tu­nately, there is not enough com­pe­ti­tion be­tween banks in Ire­land at present.

This is in stark con­trast to our Euro­pean neigh­bours, where the ex­tra com­pe­ti­tion re­sults in lower bank mar­gins and in­ter­est rates.

Mar­gins to­day in Ire­land range from 2.5pc to more than 5pc above the cost of funds.

Th­ese fig­ures are much higher than those avail­able be­tween 1997-2007, where mar­gins as low as 0.5pc plus the cost of funds were ne­go­ti­ated by strong farm busi­nesses and pur­chas­ing groups.

Step 5: De­liv­er­ing

The fi­nal and most im­por­tant step in any loan ap­pli­ca­tion is de­liv­er­ing on your farm busi­ness plan and prom­ise to re­pay the loan.

It is im­por­tant to show the bank that you are de­liv­er­ing what you said you would do — and be proud of your achieve­ments as this will stand you good stead in fu­ture ap­pli­ca­tions.

Long-term fi­nance can be ob­tained from the three pil­lar banks, Al­lied Ir­ish Bank, Bank of Ire­land and Ul­ster Bank; all three have spe­cialised agri­cul­tural ad­vi­sors to as­sist in the ap­pli­ca­tion process if nec­es­sary.

In re­spect of short-term fi­nance there are many more op­tions.

The three pil­lar banks are also in this space, but they now have in­creased com­pe­ti­tion from Strate­gic Bank­ing Cor­po­ra­tion of Ire­land (SBCI), credit unions, Fi­nance Ire­land (via se­lected milk pur­chasers), Mi­cro Fi­nance Ire­land, fi­nance leas­ing com­pa­nies and new short-term fi­nance com­pa­nies such as Linked Fi­nance.

The at­trac­tion of such sources of fi­nance are faster de­ci­sions, quicker ac­cess to cash and the lack of se­cu­rity re­quired.

How­ever in­ter­est rates are of­ten higher to re­flect the ad­di­tional risk.

Ac­cess to fi­nance is the life-blood of all farm busi­nesses.

Do your re­search, pre­pare a good ap­pli­ca­tion and put your best foot for­ward — it will shape your fu­ture progress.

IF YOU HAVE A STRONG FARM BUSI­NESS, YOU ARE IN A PO­SI­TION TO NE­GO­TI­ATE THE TERMS OF YOUR LOAN

Mike Brady is man­ag­ing direc­tor at Brady Group agri­cul­tural con­sul­tants & land agents, email: [email protected]­group.ie

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