The Credit Crunch and Agriculture
The credit crunch seems to be the only news meriting any attention at present
, but is this really having an impact on the agricultural sector? The major impact will be seen by new borrowers or those restructuring debt. In these circumstances, the cost of raising funds at bank level is increased, and therefore this will be passed onto the borrower.
In basic terms, although most owner occupier farmers have reasonable levels of security, new debt may not be at such good rates as previously seen. In order to prise as good a deal as possible out of the bank there are several things you can do to help:
1. Ensure you ask for the correct amount of capital – asking for more at a later date is a sign of poor planning
2. Structure the debt over the correct period – too quick a repayment period will see overdraft pressure
3. Make sure you have an up to date balance sheet and farm valuation – security is still vital
4. Always allow for some sensitivity and over spend in plans and budgets
5. FINALLY … Show the bank a professionally produced business plan. (CARA does these regularly)
Having all five factors above covered will gain respect and understanding from the bank manager and help in negotiating a competitive rate of borrowing.
Tags: borrowing, business plan, credit crunch