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Cleaver Fulton Rankin’s Banking team have significant expertise in agri-business finance, and are ideally placed to provide legal advice and support in this sector. Our dedicated team recognises the importance of the agri-business industry to the Northern Irish economy, and work closely with a wide range of Banks and other lending institutions who provide finance to the sector.
During the course of providing financial advice and support in the agri-business sector, our team has identified a number of typical issues, some of which we highlighted in this article.
The priorities for investment and lending within agri-business typically include, assisting with purchasing farmland, equipment finance or hire purchase facilities or facilitating diversification of the business.
Diversification often requires significant capital investment to cover costs, for example, in the renovation of buildings for accommodation or developing renewable power generation. There can also be a need for new working capital facilities to support contracting, retail and catering operations.
High street banks will require suitable collateral for such lending, which can be difficult to obtain if a business has limited assets, or is already supporting its core operations with an overdraft or other loan facilities. Personal guarantees might be requested but should not be given without professional advice and some serious thought. An alternative to bank loans and overdrafts would be specialist asset finance, hire purchase or debt finance, where greater flexibility may be available, although lending costs may be higher.
As Northern Ireland’s agri-businesses seek new markets for products or produce, government assistance is available, for example, via the Department of Business Innovation and Skills through initiatives such as the ‘Tradeshow Access Programme’ which can provide grants, for example, to help meet the cost of attending trade shows and travel support.
Another common issue for the Northern Irish agri-business sector is managing succession, where businesses are so often owned and operated by different generations of the same family, and value needs to be extracted to allow the older generation to retire and pass on control. This can often create a strain on the finances of a business, and forward planning may reduce dependence on costly finance.
A number of steps can be taken to create financial stability and reduce risk within your business, for example by updating partnership agreements, incorporating your business and separating the ownership of land from the business, perhaps granting leases of key assets, in particular the farmland. There will be certain issues to consider such as the taxation consequences, benefits of limited liability, views of customers and suppliers and future growth ambitions. In any case, these factors should remain under constant review.
This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Banking & Finance team at Cleaver Fulton Rankin, for further advice or information.