博鱼体育集团

This year's The Rural Report 2023/24 shines a spotlight on innovative lending solutions from 博鱼体育集团 Frank Finance that are helping rural businesses, farmers and landowners deal with the rising cost of borrowing.

Here we look at how the assisted David with a finance solution to ease the pressure. 

The Rural Report 2023/24 offers rural property owners and businesses the latest news, guidance, advice and key insights in rural markets.

When David Sheringham* and his siblings inherited their family鈥檚 rural estate in 2017, the Bank of England base rate sat at just 0.25%. To address a significant inheritance tax bill at the time, the family opted for a variable rate loan of £4 million.

The Bank of England has since raised the base rate on several occasions and it is now at its highest level since 2008. The family鈥檚 interest payments ballooned from £91,000 a year to more than £250,000. It鈥檚 a specific example of a much broader problem.

Identifying a development opportunity 

鈥淔or many landowners, the cost of debt is their biggest challenge,鈥� says Bradley Smith, an agricultural finance specialist at 博鱼体育集团 Frank Finance. 鈥淗owever, lenders are doing less business than they would like, so are eager to work with rural businesses to remain competitive. That includes finding new angles for raising finance, whether through new income streams or by harnessing the sustainable potential of farms and estates. This presents real opportunities for farmers and landowners if they can make an attractive case to a lender.鈥�

David Sheringham identified a development opportunity that, subject to planning, would triple the value of the estate, but could take as many as five years to realise.

At the same time, the estate's capacity to make substantial changes was limited due to the sharp increase in interest expenses.

The solution was a new loan with a private lender that offered delayed interest payments for three years.

鈥淭he loan structure came with great advantages,鈥� David says. 鈥淚t replaced the previous loan that was raised purely to pay tax and enabled us to grow the estate income through residential refurbishments and greater agricultural investment. It also meant we could start actively working with the local council to progress our housing development plans.鈥�

Interest roll-up solution

The loan type, known as an interest roll-up, isn鈥檛 a new product, but is typical of the sort of solution banks are increasingly willing to provide to bridge a difficult period, says Bradley.

Lenders are also eager to finance green initiatives and will offer favourable rates or fee-free lending for qualifying estates.

A lack of data and suitable opportunities have left many unable to meet ambitious lending targets, and most have now loosened the definition of what qualifies for green tranches of funding.

鈥淲hether it鈥檚 buying land and moving it to regenerative schemes, or capturing rainwater, renewables or even financing direct drills that are kinder to the soil, banks are keen to lend in this space and will generally work with you to find a solution," says Bradley.

Flexible options

Fee-free loans or slightly better rates might not be a silver bullet to solve the myriad of challenges rural landowners currently face, but they can be the marginal difference that facilitates the ability to adapt to an industry in flux. That was certainty the case for David Sheringham.

鈥淭his loan gives us greater flexibility on the estate鈥檚 management and development, it provides sufficient working capital that will facilitate income growth and it enables us to be free of the past tax burden,鈥� he says. 鈥淲e now have space to breathe.鈥�

*The name has been altered to protect the privacy of the borrower, but all details match a 2023 case with 博鱼体育集团 Frank Finance.

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