Lending to agriculture reached a record high in June 2012 as more farmers applied for finance.
Speaking at Livestock 2012, Barclays national agricultural specialist Oliver McEntyre said the fact that farmers were borrowing more money then ever proved banks were still willing to lend to agriculture.
At the end of June, lending to agriculture reached £12.8bn, up 6.5% on June 2011. Deposits from UK agriculture were £5.3bn at the end of June, showing agriculture is a considerable net borrower.
Mr McEntyre also predicted that borrowing would rise further in the rest of 2012 as farmers’ margins are squeezed.
“I expect feed price increases and poor weather to have an effect on borrowing in the next two to three months. And, of course, the price of land is still high,” he said.
The cost of money has also fallen slightly, with margins on short and long-term borrowing for UK farming still among the lowest available in the economy as a whole.
The perception that banks will not lend to small businesses should not affect agriculture, said Mr McEntyre. Historically, agriculture was seen as a safe borrower and, despite the overall banking landscape changing greatly, lending to agriculture has not been affected.
“It is a very favoured sector. Generally lending margins and the cost of borrowing are lower to farmers and it’s a sector we’re totally committed to. We take a long-term view on agriculture - costs may be high one year and even out the next.”
However, banks are increasingly looking for sound planning and evidence that finance has been carefully considered, he said.
Lender confidence comes from demonstrating these criteria, according to Barclays:
- Repayments (serviceability)
- Insurance (security)
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