07 Dec 2022

Funding solutions to survive and thrive in the agriculture sector

The headline challenges being reported of rising input costs, interest rates and supply chain and payment delays, to name but a few, are resulting in caution and conservatism from lenders. However, despite continued challenges, there remains a degree of optimism and desire to achieve growth in 2023.

The good news for the agriculture sector is there is a lot of liquidity in the market to support these plans and we expect to see the contribution of Alternative Finance (AltFin) in meeting the demand for new lending continue to grow.

Alternative finance for agricultural businesses

The AltFin marketplace, the catch-all term for funding options other than traditional high street banks, is expanding at pace, with new lenders launching almost every week – solutions serving every need and providing more options for businesses than ever before. Whilst we are pleased to see high street banks open for business, appetite remains cautious. The AltFin funding market presents a great opportunity without disrupting incumbent banking arrangements – it can unlock transactions and finance growth through their less conservative appetite or deployment of niche products and expertise.

There is a premium on the price, but alternative lenders can help agriculture businesses manage difficult cashflow periods through such things as interest-only periods, mortgages over longer terms or higher loan-to-value ratios. In support of all-important cashflow, they can also unlock cash tied up in specific debtors through Selective Invoice Finance, for example.

The agriculture sector remains key to banks, with many investing in and maintaining their specialist teams in recognition and support of this. In addition, several niche lenders serve the sector very well, recognising the diverse aspects within the industry. The green agenda has been around for a while, but we have seen an increase in the number of specific loan products being brought out in support of green projects – offering a discount on borrowing margin when able to evidence energy performance improvements, for example.

Get in touch

The key message to reiterate is there is a lot of liquidity, so speak with your advisers to explore the options available. To continue to manage the headwinds, it is crucial agriculture businesses have access to funders who have expertise of the sector and truly understand the challenges and opportunities they face. With unrivalled expertise and experience of whole of market funding options, we are well positioned to assist businesses to understand what funding options are available to them, saving management the time and effort of trying to navigate what is now a substantial marketplace.

If you have any queries, please get in touch using the form below or contact our debt advisory team or speak to one of our agriculture accountants.

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