While agriculture is classed as an industry, the fact remains that it has many features which set it apart from industrialised industries such as manufacturing and it is indisputably worlds away from the digital economy. Notwithstanding this, agriculture has moved on substantially from the old-fashioned days of horses and ploughs and modern agriculture requires a continual investment in the technology required to maximise yield and manage agricultural holdings effectively. At a time when high street lenders are becoming both more risk averse and more focused on what they know (which increasingly tends to be more modern activities) it’s becoming increasingly important for those seeking agricultural finance to seek out lenders who actually understand their business and who work on the “old-school” system of looking at the person as well as the headline numbers. Here are 3 tips to finding a top lender.
The ability to finance used equipment as well as new
Generally speaking, anything new comes with a price premium for its newness. Sometimes this premium is worth the money, if someone makes a major technological development which could really benefit your business, then it probably makes sense to take advantage of it as quickly as possible. On the other hand, if you just need to replace equipment which is coming to the end of its lifecycle, or to expand your operations, then used equipment may be a far more economical way to go. The problem with buying used is that you generally have to pay the full purchase price at time of purchase, rather than being able to take advantage of manufacturer finance deals as with new. Ideally, therefore, you want to find a lender who offers rates which are comparable to those offered by manufacturers when you buy new and who is happy to finance purchases of new or used equipment. Then you have the widest choice at the best rates.
The ability to offer different financing options
While investing in new equipment and tools is a more or less constant requirement for those in the agricultural industry, each purchase decision is made on its own individual set of criteria and sometimes the right decision is to go for hire or lease rather than outright purchase, for example if the equipment is only needed for a short period of time, e.g. for one specific job. In addition to having different financing options available, a top-quality lender will have staff who are able and willing to guide you through the different options and help determine which one is most appropriate for the given situation.
The ability to tailor financing to your needs
The best lenders have the ability to treat the standard financing options as templates, which can then be adapted to suit the individual customer. In the case of agriculture, the seasonal nature of the business can mean that the ability to adjust payments to rise when income is at its highest and drop again as cash-flow tightens. This helps customers to strike a balance between stability and flexibility.
“Own book” lenders
The lenders who are likeliest to meet these three criteria are those which run their own book themselves, rather than operating as agents for other companies. Owning the whole process gives these lenders maximum flexibility in how they operate. For example, it allows them to incorporated human elements, such as the quality of the management of an agricultural enterprise, as well as just looking at the hard numbers. These boutique lenders also tend to be interested in forming long-term partnerships with their customers, which means that they are often much more customer-focused than their high-street counterparts and more willing to learn about their customer’s business and what it needs for success.