Cash flow problems should be felt in the fall, warns the bank
The banking industry warns that pressure on cash flow will worsen later in the year as high on-farm costs weigh further.
Defra has monthly talks with agricultural banks on the impact of cost pressures. This is a more frequent program than in the past, said Roddy McLean, director of agriculture at NatWest.
Speaking of farmers’ growing borrowing needs, he said: “It’s a constant stream of requests at the moment that we’re getting. [for additional funding]but we expect it to have the potential to pick up speed as we move through summer and fall.
Farmers are urged to revise their cash flow plans more frequently as there is a risk that BPS advance payments will be used to cover high input costs and then not be available for other costs later.
For example, many companies expect payments such as hire purchase and loan repayments to coincide with the arrival of the BPS in December and January.
Lower interest rates on small business loans
NatWest is putting in place measures to support the agricultural sector facing high inflation and cash flow problems.
The bank has announced an interest rate cut of between 0.5% and 1.35% for small business loans between £10,000 and £40,000.
Ian Burrow, head of agriculture at NatWest, said: “For small loans below £40,000 the annual percentage rate (APR) will be around 8.9% to 9.65% after the cut. “
The exact rate reduction will vary depending on the terms of the agreement and the amount borrowed.
NatWest has a UK market share of 28% in agricultural banking and works with around 41,000 agricultural businesses.
Mr Burrow said it would provide increased overdraft limits for customers with a short-term problem that they would quickly recover from, as it is the cheapest way to borrow short-term.
“However, if the client feels this is going to be a longer term issue for their particular circumstances, we will work with that client to consider alternatives such as a smaller overdraft combined with a principal repayment holiday or a loan. , ” he said.
Principal repayment holidays are offered where customers only pay interest on a loan for a set period of time, usually between six and 12 months. However, this will vary from company to company.
Payments during the holidays would be calculated on an interest-only basis, with extended repayment terms or monthly repayments later adjusted upwards to cover this.
NatWest has launched a green loan, to invest in cleaner businesses and practices without having to pay application fees.
A wide range of activities and purchases are eligible for green lending, including biodiversity and natural capital projects, forest establishment, water management, regenerative practices, renewable energy and low-carbon vehicles. carbon emissions such as electric tractors.