Oxbury launch lending scheme for new entrants

Oxbury Bank has launched a lending scheme for new entrants that could see them borrow up to 100% of their cashflow requirements for the first year of business without having any initial funds of their own or trading history.

The funding package, which will be accompanied by free advice from farm consultants for up to three years, is available for borrowers aged between 18 and 40 who are launching a new start-up business.

The farming-focused lender says its Oxbury New Gen product could help with succession planning, where the younger generation cannot currently get access to working capital to buy stock and machinery from the retiring older generation.

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Oxbury managing director Nick Evans said that some new entrants who had been turned away from other banks should expect to get approval with Oxbury, as the bank was prepared to take some more risk.

“The steps we’re taking at the front end, in both the process for application and the steps post-application working with the consultants and the relationship managers, massively mitigate the additional risk we’re taking,” he said.

“Obviously, new entrants with no track record are a higher risk than someone who has a track record, but I think we’re mitigating that substantially.”

The variable rate loans will be offered to borrowers seeking between £25,001 and £2m in funding and will be available for a term of up to 25 years.

The finance will be structured in two parts, with 75% of the lending secured by Oxbury against the farm business assets.

The charge for this will be an interest rate 3% over the base rate on average, although Oxbury say a higher rate would be levied on a higher risk business.

The remaining 25% of the loan will not be backed by equity and charged at a rate of up to two percentage points above the rest of the borrowing.

Oxbury says the higher rate segment will be repaid preferentially and that interest-only repayments may be available for a number of years as businesses get established.

The Chester-based bank, which formally opened for business in February 2021, says it has lent more money to farmers this year than any of its rivals.

It is aiming for the New Gen product to be up to 10% of its loan book, meaning up to £110m of funds will be available by the end of 2024 if it hits its overall lending forecast of £1.1bn.

Oxbury made a pre-tax loss of £7.49m in the year ending 31 December 2021.