Are your farm finances structured correctly?

November 14, 2017

 

Many farming businesses have a significant overdraft facility in place to enable continual trading through periods of natural troughs in the cash flow.  Very often we see capital expenditure put on the overdraft, which can result in the negotiation of an increase in overdraft facility at the next renewal, or sometimes sooner. 

 

The overdraft facility does have a number of advantages, most importantly it provides flexibility.  However, borrowing on an overdraft facility is often an expensive way to borrow money, with high annual arrangement fees, and higher interest rates than other options.   An overdraft facility also does not offer a structured repayment plan.

 

Restructuring of the farm finances could therefore save the farm money, but also offer a structure to repaying the debt over future years to reduce the total borrowings of the business. Establishing the amount to move from an overdraft facility to a more formal facility can be very difficult.  To establish a sensible amount to transfer, it is often necessary to prepare 3 – 5 year cash flow projections to enable projection of forward bank balances.

 

Our Business Projector software has been designed to demonstrate the effect of different options for structuring your farm finances in a clear, easy to understand format. 

 

If you would like to look at the options for restructuring your farm finances, or would like to investigate the best way of funding an upcoming capital purchase, please give Sam a call on 01454 614624 or 07777 696080, or email sam@kellyfarmconsulting.com.

Please reload

Recent Posts

August 25, 2020

Please reload

Archive

Please reload

Tags

Please reload

Follow

Contact

01454 614624

Address

The Farm Office, Manor Farm, Aust, Bristol BS35 4AT

©2017-2019 by Kelly Farm Consulting All Rights Reserved.