There is absolutely nothing wrong with seeking to renegotiate borrowing terms or facilities with your bank, especially in the current industry conditions, but it is vitally important to get the process right when you do, says farm finance consultant, David Hughes.

 

"I've taken several calls from farmers this month on how to prepare for a meeting with their bank manager and the key message each time is for them to be fully prepared for the task," said David. "That means making sure cash flow projections and budgets are up to date, as a point of absolute priority.

 

"It may also be worth considering having a third party to help; either the farm accountant or an adviser you already know and work with.

 

"It is a tough time for many sectors at present, so a request for additional funding support or more achievable repayment terms, makes good business sense. The mistake isn't asking for help, but rather delaying that process until the situation becomes critical.

 

"If the case for additional finance or better terms is put professionally, the reputation of the business can actually be enhanced. Bank managers are there to assist the businesses they look after and help solve these sort of issues, In fact, that's what farmers pay them to do and it's important that both parties remember that.

 

"Other areas for farmers to consider, if cash flow pressures become too severe, could include seeking to refinance equipment which may have been bought on an initial low rate finance deal, which has now expired.

 

"Zero per cent finance deals on a new tractor or combine are typically done over a limited timescale, say three years, when the sensible option may be five years. If cash flow is tight, or the overdraft is starting to hurt, therefore, the sensible strategy is to ask a 0% finance provider for a longer term deal.

 

“While many farming sectors are having to cope with high levels of volatility at present, the fundamentals of the industry remain strong, with an asset base which is superior to many other industries. For the vast majority of farmers, therefore, short-term cash flow pressures are exactly that, short-term and solvable.”