Business Clinic: Tips to set up a social enterprise on farm

Whether it’s a legal, tax, insurance, management or land issue, Farmers Weekly’s experts can help. Here, Christopher Turner of Carter Jonas advises on finance and budgeting for a social care enterprise.

Q. I’m writing a business plan to set up a farm as a therapeutic (but hardworking) setting for young people with emotional and mental health issues who are falling through the gaps in social care.

Over their lifetime, a child excluded from school could cost the taxpayer £350,000. By disrupting that pattern through farm stays, it has been shown that behaviour, wellbeing and school attendance improve for these children. I would also be providing employment and volunteer roles.

I would greatly appreciate your advice on possible funding streams (for example, lenders, grants and any other sources) and costs such as business rates, insurance, and other likely costs or issues which I may have overlooked.

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There is a lot to think about from the outset, and funding is a very good place to start. The good news is that as you’re running a charitable organisation, you’ll have more options than most rural businesses would.

Consider a lottery grant or crowdfunding to cover the initial and ongoing costs, or investigate possible support from charitable organisations or businesses looking to fulfil their corporate social responsibility.

There are also plenty of private funds looking to invest in social projects, but they will require a return. 

In terms of grant funding, there are a few options. The Basic Payment Scheme would apply for the practical farming of the land, and a Countryside Stewardship grant could provide income for the first five years of the new business.

Leader grants support small rural businesses and diversification in rural areas though a local action group, so you should look into what’s available and the priorities for your area.

The government has also recently reopened the RDPE Growth Programme, offering grants for projects that, among other things, create jobs in rural areas.

If you are considering borrowing capital to set up the venture, the Agricultural Mortgage Corporation offers agricultural-focused lending of sums higher than £25,000 for between five and 30 years.

It likes to see a farming business making the repayments, but are happy for you to use the cash for diversification.

Commercial banks with specialist agricultural managers will lend against your assets and you might find such banks more flexible, as they can consider angles other than agriculture.

Regarding business rates and insurance, although agricultural property is generally exempt from business rates, you’ll need to double check that some of your activities don’t fall outside the exemption (for example, if you have classrooms).

You’ll need public and employers liability insurance, along with personal accident and vehicle cover.

As well as staff wages, budget for a pension contribution of 3% of their salary from April this year. This is set to rise over the coming years.

Everyone involved with the children will also need training, including the volunteers.

Having children will require additional safeguarding policies and risk assessments, so you might find you need a permanent administrator to deal with this paperwork.

Factor into your budget some costs for planning. Depending on what you’re intending to do, you might need to submit applications for planning permission or change of use of existing buildings.

You may well also require some professional advice, from a solicitor, a land agent, a planner and an accountant.

There are a few crucial non-financial considerations, too – have you thought about how the business will be structured? The obvious way would be as a charity with trustees, but look into other options, as that may not in fact be the best. 

Finally – compliance. You’ll need to make sure that Disclosure and Barring Service (DBS) checks are up to date and on file for everyone who has contact with the children, that fire risk assessments are up to date and reviewed regularly, and that the asbestos survey is up to date and a management plan in place.

It would also be wise to take time now to consider whether any changes need to be made to the farm to enable access for those with disabilities.

Speak to professional advisers, as well as others who have launched similar projects. You’ll likely garner some valuable feedback and get some great insights.

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