Banks extend borrowing

BANKS ARE offering special loan products to farmers to help them face cash shortfalls caused by delays to the single farm payment.

And though the extra costs of servicing the debt are put at £20-25m, the banks insist that rates will be the same as for regular lending.

Natwest was first out of the blocks, with a single payment scheme loan that it promised would be easy and quick to set up.

“There‘s a cash flow hiccup in England this year, but there‘s no reason to believe the payments won‘t return to usual next year,” said Ian Kenny, head of agriculture at the bank.

“The industry realises things are going to be tighter this year and farmers need to talk to their bank manager now to begin thinking how they want to restructure their debt to line it up with income.”

Farmers in England would see the biggest delays, he said, where those used to receiving advance sheep premium payments could wait more than six months for the SFP to come through in March 2006.

But the expected payment to Scottish, Welsh and Northern Irish producers in December could also cause cashflow problems, he added

Euryn Jones, Barclay‘s agricultural policy director, urged farmers to work out any extra borrowing they would need and apply for either a loan or an extension to their overdrafts.

“A late cheque does not turn a good business into a bad one,” he said.

“Farmers need to know they won’t have to resort to selling crops and livestock early, or having to seek additional credit from suppliers.”

But Tim Porter, head of agriculture at Lloyds TSB/AMC said a special product would just create unnecessary extra costs for customers.

“Overdraft extensions are business as usual, and we already offer a flexible loan, which is half way between a current account and a mortgage.”

Steve Ellwood, head of agriculture at HSBC, said: “For farmers this is a significant hiccup in cash flows, and we will look at that as sympathetically as we can.”