28 December 2001

MAKETIMETOSTUDYALLOPTIONS

FARMERS must make time to look at different types of finance in order to choose the most appropriate product, says AMCs chief agricultural advisor David Hudson.

"Its no good rushing in to what looks like a good deal now, which could look very different in two years time. You have to remember that only in 1990, we had a base rate of 15%. Its vital that people take account of the implications of rate changes and other variable factors affecting their business."

To support an application, budgets and cash flow projection need to be well prepared and supported by realistic assumptions. If you have an adviser helping you to prepare information, make sure that they are experienced in financial management, warns Mr Hudson.

"As the going gets tougher, we are seeing some farmers whose consultants cannot come up with practical solutions and sound advice, for example, when the business faces a cash flow deficit. The skills needed now are that much greater than in the past, and some of the advice we have seen recently is not impressive," he says.

AMC launched its flexible loan in June 2001, a departure for the corporation because it had not previously lent for periods of less than five years. This product is essentially a bridge between an overdraft and a traditional loan, providing a revolving facility for a term of up to five years.

Terms are competitive with overdraft rates, says Mr Hudson, and the loan requires security in the form of land, buildings or dwellings. An annual arrangement fee is charged in addition to the lenders margin over base rate.