Tips on securing your credit lines
It is that time of year again when farmers wind down for a couple of weeks to recharge the batteries before the calving, lambing and planting season kicks off the farming cycle once again.
It's also a period for preparing financial budgets for the coming year. A recently published report by the Credit Supply Clearing Group outlines the key funding options open to businesses, gives an insight into what banks look for when examining credit applications and outlines practical tips on how to package your credit application.
The first thing it addresses is how you manage your debtors and creditors. Ways of doing this include giving clear responsibility to somebody for collecting and paying money.
Check out if suppliers such as feed companies and contractors offer discounts for prompt payment or whether payment can be made at specific times of the year.
For example, it may be possible to make your payment date coincide with the date you receive your single farm payment or during the months that your milk cheques are biggest. Identify key cost drivers within the farming business such as feed and contractor costs and seek to reduce them, even a little at a time by joining buyer groups or undertaking to buy all your feed from one particular co-op/company for an agreed discount.
The report reinforces the fact that the cheapest source of funds is often the cash within your own farming business and effectively managing cashflow may reduce the need for external funding.
After assessing other funding options available to your farming business, such as family investments, venture capitalists and State/EU/grant aid, you can begin to look at applying for credit from a financial institution. Before applying for credit and meeting with your bank manager, you should meet with your accountant to ensure that you can clearly demonstrate a thorough understanding of your farming business and its financial position and future financial performance.
The report suggests the following as key pieces of information that should be provided by farmers in seeking loans: