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Richmond Asset Finance Guide to Farm and Agriculture Finance

Richmond Asset Finance is a specialist business lender to the agricultural sector that offers traditional, responsible lending to farmers throughout England, Scotland and Wales.

Farm finance is on the rise again and is becoming an attractive sector as farmers need loans that can be secured on real assets as farmers now need to find new sources of capital to sustain, grow and improve their businesses. Again we can help with asset finance and for equipment and various land and property finance is available too. Click here to view our services and solutions here.

Here are a few reasons why you may require Richmond Asset Finance Agricultural Finance:

  • Diversification, farmers need capital to diversify and build new businesses. Diversifying your enterprise can increase revenue and reduce risk. We understand this and the benefits it brings in the current market, as our team has direct experience of building new businesses.
  • Purchasing new farmland when additional acreage or a unique property opportunity may come available and often at short notice. Additional acreage or a unique property opportunity may come available at any time and often at short notice. Richmond Asset can move quickly to help you secure this and expand your business.
  • Property finance allows farmers to develop, renovate or repair property for capital appreciation and income generation. Are you making the most from your property? A loan from us could help you develop, renovate or repair property for capital appreciation and income generation.
  • Renewable energy projects can be a great source of additional income and add real value to under-utilised land on a farm, or even turn waste products into revenue. Renewable energy projects can be a great source of additional income and add real value to under-utilised land on your farm, or even turn waste products into revenue.
  • Livestock Finance is utilised by farmers to expand their livestock holdings. Once you decide that you’d like to expand your livestock holdings, our facility can provide a flexible option that can be used repeatedly, allowing you to make judicious purchases or sales, depending on the market.

What is asset refinancing?

What Is Asset Refinancing?

Asset refinancing is an alternative finance arrangement that offers a simple and straightforward way to raise cash against an asset that your company already owns. Depending on the amount of funds required, you can refinance any single or multiple assets. You don’t even have to own the asset outright; refinancing arrangements can be offered on the equity tied up in company property. Refinancing a number of assets is also referred to as debt consolidation.

Richmond Asset Finance offer a number of different asset financing solutions for your business. Asset Finance is a very useful financing option because of the many benefits to your business. A business in any sector can have many financial assets and there are a number of ways to attain finance for these. In recent times this makes it the third most popular source of finance for UK Businesses.

What Are The Benefits Of Asset Refinancing?

Asset refinancing offers a simple, cost-effective and quick way to secure additional finance for ongoing business activities. You can continue to use the asset offered as security against the loan, whilst using the released funds to invest in new assets, such as a larger fleet of vehicles or new company premises. Most asset refinancing arrangements offer structured payment plans to help business owners budget effectively. Interest rates and charges are agreed upfront so you won’t incur any surprises during the lifetime of the loan. Once the loan amount has been agreed, along with associated rates and charges, you will be required to pay fixed instalments on a weekly, monthly or quarterly basis.

ASSET FINANCE IS ONE OF THE FASTEST GROWING FORMS OF FINANCE TODAY – Call us for more information.

How has the Coronavirus affected bridging finance?

Surveyors are being extremely cautious

Even where a valuation can be done, surveyors are being very cautious. Whilst they will be producing the usual figures for an open market valuation, 30 day, 90 day and 180 day sale, they may also add a revised figure to allow for the likelihood that prices will fall after the pandemic is over.  Some surveyors have even taken to writing, ‘this valuation cannot be relied upon’, on their reports. This makes the report worthless to many bridging lenders, who aren’t prepared to lend on the basis of this type of valuation.

Social distancing causing problems with witnessing legal documents

There are currently problems with getting legal documents witnessed by a solicitor as most are now working from home and not seeing clients face to face. 

Staffing shortages are affecting lenders too

Lenders have also been impacted by the requirement for staff to work from home wherever possible and have had to set up systems to allow staff to work remotely.  

Staffing numbers have been hit by those needing to self-isolate, which has affected lenders’ abilities to deal with new cases.

Bridging Finance during the Covid19 Pandemic

How has the Coronavirus affected bridging finance?

Some bridging lenders have stopped lending

A number of bridging lenders have stopped providing bridging loans during the current Coronavirus pandemic. Many lenders have announced that they are temporarily stopping all new lending or restricting the size and types of loan that they offer.

Some current lending applications have been cancelled

Some lenders have cancelled on-going applications and have even pulled current offers where contracts have not been exchanged.  In some cases lenders are requiring customers to start the application process again from scratch.

Those still lending have reduced loan to values and loan sizes

Those lenders who are still offering bridging finance are being very cautious and have taken actions such as reducing their maximum loan sizes.  Maximum gross loan to values (LTVs) are down from 80% to around 60 to 65%.

Bridging Loans when selling a house – what are the pros and cons?

Pros

  • You can buy your new property right away: You don’t have to wait to get a loan.
  • It gives you time to get a better price on your property: You can avoid the stress of having to sell your property quickly. By taking the time, you may be able to get a better price for your property.
  • Interest-only repayments which are capitalised on your peak debt: Your bridging loan repayments are usually ‘frozen’ during the bridging term until you sell your existing home. You’ll only have to keep paying your current mortgage and not have to worry about managing two home loans.
  • Banks charge standard interest rates: In the past, banks charged a higher interest rate for bridging loans but now there are some lenders that charge standard variable interest rates.
  • The same fees and charges as a standard home loan: Application fees are the same and you don’t have to worry about break costs or discharge fees for paying the loan off quickly. Keep in mind that most lenders won’t generally approve a bridging loan if you’re likely to sell the property in less than 3 months.
  • You can make unlimited P&I repayments: To reduce your interest bill, you can actually choose to make as many repayments on the bridging loan until you sell your property.
  • Avoid the costs of renting and moving twice: Sometimes renting and having to pay for the costs of moving twice may be a better option than getting a bridging loan. It’s important to speak to a qualified mortgage broker so they can help you do the sums to find out which option is better for your situation.

Cons

  • Interest is compounded monthly: Although the interest is capitalised on top of the peak debt, the longer it takes to sell your property, the more your loan will accrue interest. Interest is compounded on a monthly basis.
  • You need to pay for two valuations: This will be a valuation of both your existing property and the new purchase.
  • Higher interest rate if you don’t sell the property in time: If you don’t sell your existing home within the bridging period, a lot of lenders will charge a higher interest rate. Many will also require you to start making principal and interest repayments on the peak debt in order to service both loans. This can cause financial stress.
  • No redraw facility: If you choose to make repayments during the bridging term but need to redraw for any reason, you won’t be able to do so.
  • Normal early termination fees will apply if switching lenders: If your current lender doesn’t offer a bridging loan product, you’ll have to go with another lender that will likely insist on taking on the entire debt (your existing mortgage plus the bridging loan). Because you’re switching lenders, you may be liable for early termination fees and break costs particularly if you’re switching during a fixed interest period.

Bridging Loans: Explained

Selling your home and buying a new property at the same time can be a little tricky.

It can sometimes take a while to sell your home, leaving you without the sales proceeds to buy your new property.

With a bridging loan, you can avoid the stress of matching up settlement dates, move quickly to buy your new home and give yourself more time to sell your existing property.

A stort-term bridging finance is also known as ‘relocation loan’.

Bridging loans explained: How does it work?

A bridging loan is basically finance that allows you to buy a new property without having to sell your existing property first.

Banks work out the size of the loan by adding the value of your new home to your existing mortgage then subtracting the likely sale price of your existing home.

What you’re left with is your “ongoing balance” or “end debt” which represents the principal of your bridging loan. Banks will assess your ability to make mortgage repayments on this end debt.

Lenders use both properties as security and you’ll have one loan (peak debt) to cover both the existing debt and the new purchase.

Between when your bridging loan is advanced until you sell your existing home, most lenders capitalise interest-only repayments on the peak debt which means that you’ll only have to worry about continuing to make principal and interest (P&I) on your current mortgage, rather than trying to manage repayments on two home loans.

After your property is sold, you simply continue to make normal home loan repayments, plus the compounded bridge loan interest, on the new loan.

Small businesses boosted by bounce back loans

The government have announced its intention to offer bounce back loans to small businesses. The key terms of these loans are:

  • businesses will be able to borrow between £2,000 and £50,000 and access the cash within days.
  • loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form.

Small businesses will benefit from a new fast-track finance scheme providing loans with a 100% government-backed guarantee for lenders.

Rishi Sunak said the new Bounce Back Loans scheme, which will provide loans of up to £50,000, would help bolster the existing package of support available to the smallest businesses affected by the coronavirus pandemic.

The scheme has been designed to ensure that small firms who need vital cash injections to keep operating can get finance in a matter of days, and comes alongside the £6 billion awarded in business grants, supporting 4 million jobs through the job retention scheme and generous tax deferrals supporting hundreds of thousands of firms.

The government, which has been consulting extensively with business representatives about the design of the new scheme, will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months. No repayments will be due during the first 12 months.

The loans will be easy to apply for through a short, standardised online application. The loan should reach businesses within days- providing immediate support to those that need it as easily as possible.

‘Whole new business’

Farmers innovate to get food from field to plate during the coronavirus pandemic. A report from Reuters has explained the struggles that farmers currently face.

New recruits for seasonal work

Finding seasonal workers is a priority in Europe, where spring harvests are at risk because the usual vast armies of migrant labourers cannot leave home as all of the boarders are currently closed.

Spain, the European Union’s biggest fruit and vegetable exporter, has responded by allowing the unemployed to take farm jobs while keeping welfare payments, and has extended work permits for those migrants already in the country.

France has mobilised 15,000 French workers idled by the crisis so far to help offset a potential shortfall of 200,000 foreign labourers this spring. 

It has been suggested that farmers were frustrated that the new recruits lacked skills or had quickly quit. 

Poland, meanwhile, is struggling without Ukrainian seasonal labourers and the Russian Agriculture Ministry said prisoners might help out on farms in the absence of Central Asian workers. 

Germany, Britain and Ireland are allowing companies to bring in trained workers from Romania and other European Union states on charter flights with quarantine measures. 

U.S. President Donald Trump has exempted such migrants from a temporary curb on immigration during the crisis. 

Elsewhere, Nigeria’s federal government is making identity cards so farm workers can move freely during a national lockdown after many were stopped by police. 

Iraq’s Agriculture Ministry said farm workers were exempted from curfew measures and farmers were allowed to move harvesting machinery around the country. 

To keep transport links running smoothly, Brazilian toll-road operator CCR SA has distributed more than 1,000 food and hygiene kits a day to truck drivers as service outlets are closed. 

In Kenya, Rubi Ranch has been sending avocados to Europe by ship due to limited air freight capacity, as airlines have grounded aircraft and cut off the company’s usual supply route.

Farmers cannot be the forgotten heroes of the coronavirus pandemic

The coronavirus pandemic has amplified the uncertainty and fragility of the conditions within which farmers operate.

The coronavirus pandemic has caused us all to become acutely aware of our own mental health, as a “new normal” has emerged. In the UK, there is sharp focus on the mental health of keyworkers supporting the nation in an array of fields such as the NHS, social care and education, but one industry’s contribution that should not be overlooked is the farming and agricultural workforce.

Seasonal labour

Concerns around levels of seasonal labour also predates the pandemic, and concerns have been raised by those within the industry throughout the Brexit debate. UK seasonal farming has been chronically understaffed since the UK voted to Leave and the value of the pound fell. As has been widely documented, an estimated 70,000 seasonal workers are required throughout the year, and around 90 percent of those are from outside the UK. But with restrictions on travel due to coronavirus, farmers in the agricultural, horticultural and dairy industries in particular are reporting severe labour issues.

The Government recently launched its “Pick for Britain” campaign to mobilise a land army of British pickers to help fill farm vacancies. This did not come without concerns from farmers, as many seasonal workers are normally returnees, arriving at the start of the season fully trained in the necessary skills and machinery to hit the ground running. By stark contrast, training new UK recruits can be costly and initially result in lower productivity. Furthermore, recent reports note that, following tens of thousands of initial sign-ups, just 112 people were hired by UK farmers last week. Many applicants cited that they could not commit to the full length of the contract, farms were too far away, or they had caring responsibilities and therefore could not work long hours.

Change in consumer demand 

Changes in consumer demand during the coronavirus pandemic, with a move from out-of-home eating to more meals eaten at home – an estimated 500 million more per week – has resulted in some farmers losing their market overnight. This is down to difficulties in redirecting food produce once destined to the foodservice sector, as it been noted that consumers often wont replicate the meals that they would have had out of home, and there are issues with repackaging foods for retail. The impact on dairy farmers has been widely documented with videos of many having to pour away milk – an estimated 1m litres worth – along with the effects on the meat and horticulture sectors. Further to this, farmers have been faced with an increase in the theft of animals by criminals seeking to “cash in” on public concerns about food shortages.

To compound the challenges, the instruction by government to close B&B accommodation and farm cafés amongst other restrictions, and the subsequent loss in public demand, has also impacted farmers who have diversified their sources of income. These diverse streams of income are often vital to small farms’ survival, as many do not make a profit from their farming activity alone, so the financial consequences of this collapse will undoubtedly impact many in the sector.

Over Half a Million UK Companies in Significant Financial Distress

According to redflagalert, a report has suggested thats:

  • 509,000 UK companies are in significant financial distress—the highest number ever measured.
  • The coronavirus lockdown has seen the largest quarterly increase in the number of businesses in significant distress since the end of 2017, growing by 15,000 companies.
  •  This figure is expected to increase throughout Q2 as COVID-19 restrictions continue.
  • The number of critically distressed businesses increased by 10% in the last quarter alone.

During Q1 2020, the number of UK companies experiencing significant financial distress exceeded the half a million mark for the first time since our research began.

Latest figures show a 3% quarterly increase in the number of companies that are unable to meet their debts—that’s 15,000 businesses, representing the largest increase since the end of 2017.

The leading cause of this is the coronavirus restrictions and our data shows that SMEs have been worst hit, representing over 99% of all businesses in distress.

Companies with less than 250 employees are particularly vulnerable at this time as many have struggled to access government support schemes.

Even more concerning is that our data shows a 10% jump in the number of businesses in critical distress in the last quarter—this is usually a precursor to insolvency.

A recent survey from redflaghalert has suggest that there has been a significant increase in businesses experiencing critical distress; 2,289 companies are now in this category. Between Q4 2019 and Q1 2020, the increases in certain sectors have been dramatic:

  • Bars and restaurants: +37%
  • Real estate and property: +21%
  • Construction: +11%
  • Retail: +8%
  • Manufacturing: +8%

The sectors that have been hardest hit by significant financial distress in the last quarter are:

  • Real estate and property: +6%
  • Hotels and accommodation: +5%
  • Construction: +4%
  • Health and education: +4%

Since 2014, several sectors have had huge increases in the number of businesses in distress. These sectors include:

  • Utilities: +132%
  • Real estate and property services: +104%
  • Sport and health clubs: +86%

Year-on-year, all but one (printing and packaging) of the 22 sectors monitored by Red Flag Alert have seen increases in the number of companies in significant distress over the past 12 months, with the worst affected being:

  • Real estate and property: +17%
  • Sport and health: +8%
  • Food and beverage: +7%

Many businesses are currently not failing immediately because the government support schemes. The suspension of court action has stopped many businesses from also going under. However, this will only be a short-term solution and once things start to normalise again the figures may increase.

Typically, it would be expected that 4.3% of these companies will fail each year not because of coronavirus restrictions, but because they were already at high risk of failure from any short-term drop in revenue and cash flow. However, the impact of COVID-19 will see this figure double and leave the UK economy with insolvent debts totalling £8.6bn this year.

Will Coronavirus affect my loan?

Loan and credit card payments to be frozen for three months in UK.

The financial regulator has announced plans to freeze loan and credit card payments for up to three months as part of emergency measures for consumers impacted by the coronavirus outbreak. They have also announced plans to help businesses that are struggling in the current climate.

The new measures which could come into force by 9th April is aimed at consumers and renters who are not benefiting from existing relief measures that have targeted homeowners – with mortgage payment holidays – or business owners.

The FCA has advised that banks and credit card providers will have to ensure that consumer credit ratings are unaffected by any of the measures.

If you are looking for a loan or bridging finance for your business in the agricultural sector. Feel free to give us a call or email us today and we will be happy to help!

Starting a Farm – Mortgages and Finance

Do you aspire to live in the country, where your partner will continue to work and you want to run a smallholding or are you starting a farm business?

Richmond Asset Finance often receives enquiries from customers who want to start a farm and we have the ideal farm loan for this type of scenario, whether short or long term Richmond Asset Finance can help.

Obtaining farm finance can be difficult, especially where accounting information may not be good enough for the banks.

You may qualify for finance on a long-term basis through Richmond Asset Finance, but we also have a great farm selection of loan products that fits the bill for a farm start-up.

What is farm finance?

An all embracing term we use to describe all types of farm and agricultural finance we arrange in the rural and country business sectors, which can also be described as agricultural finance, equestrian finance, land finance and horticultural finance, a farm mortgage or farm loan. Farm finance can be provided for farms of any size (with our without a farmhouse), holiday complexes, caravan parks, caravan sites, estates, land, buildings, working farms, non-working farms, nurseries, garden centres, smallholdings, estates, fisheries, farm shops, riding schools and generally all manner of rural properties or in some cases not so rural.

Why Richmond Asset Finance?

  • A well-established and reputable company.
  • A great team that will help you with every query you may have.
  • Hands on and experienced.
  • We work in partnership with our customers to help them achieve their goals.
  • References are readily available.

Richmond Asset Finance adding value to your farm equipment

Richmond Asset Finance offer financing solutions for farm equipment manufacturers and suppliers in the processing, handling, and storage industries. Plus commercial and retail finance solutions so that distribution partners and authorised dealers have an efficient global distribution network.

Richmond Asset Finance is an all embracing business and we cover all types of farm and agricultural finance we offer to the rural and country business sectors and which can also be described as Agricultural Finance, Equestrian Finance, Farm Finance, Land Finance and Horticultural Finance. Finance can be provided for holiday complexes, caravan parks, caravan sites, properties with agricultural restrictions, land, buildings, working farms, non-working farms, and generally all types of rural type situations.

What purpose might be appropriate for farm finance?

Any legal purposes including but not being limited to repaying debt, repayment of an overdraft, diversification, working capital, business start ups, reducing outgoings, purchases of any kind and development of property or development of business.

Richmond Asset Finance are one of the most reputable sources of rural & farm finance in the UK. We guide and advise you throughout your application process, making sure your individual needs and circumstances always come first. Although we co-operate with a diverse range of banks and financial institutions, we are above all, independent. This means we always tailor a solution that best meets your requirements, not the banks.

We provide farm finance and refinance solutions, bridging finance packages, impartial advice, support and a level of customer service envied by our competitors.

UK banks set out details of Covid-19 mortgage holidays

Households hit by coronavirus will not lose credit ratings if they delay payments as the government gives a 3-month mortgage holiday.

The unpaid interest will still be recovered later, but individual credit ratings will not be affected.

The Guardian has suggested that ‘firms will help customers the best way for the individual, but an automatic payment holiday may to always be the most suitable approach and may not be required by all customers’.

Full payment of the arrears will still assume an eventual full repayment of arrears. While a person is taking a payment holiday, the interest that would have been paid will still rack up, and the capital sum of the loan remains.

These holidays are not a long term solution but they are designed to help the temporary income shortfall. If this is a smooth and seamless process that will enable homeowners to self-isolate without having to worry about their mortgage payments then clearly it is a significant move in the right direction.

The Economic Impact of the Coronavirus Pandemic

Shoppers across the country British shoppers have been greeted by empty shelves where toilet paper or canned food are usually stocked due to panic and bulking buying.

Shops are now opening earlier to allow elderly to do their shopping and doing their best keep up with the booming demand for certain products like cleaning supplies or toilet paper, but experts say all consumers have a role in making sure basic goods are available for everyone who needs them.

Most economists expect the long term hit to businesses and consumer spending because of COVID-19 will have long-term ramifications for the greater economy and potentially lead to a recession.

The chancellor, Rishi Sunak has unveiled a package of financial measures to shore up the economy against the coronavirus impact.

It includes £330bn in loans, £20bn in other aid, a business rates holiday, and grants for retailers and pubs. Help for airlines is also being considered.

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