An Agricultural Land Loan for a Community-Focused Enterprising Farmer

When we started UK Agricultural Finance, we focused predominantly on pure agricultural loans, such as loans for agricultural properties and the purchase of agricultural land. We now offer loans for a full range of business purposes as long as they have an agricultural connection, alongside our simple land purchase loans.

Agricultural land loans are often not as simple as they may seem on paper, and our personal touch with borrowers allows us to fully understand the story and context of a land purchase. This was the case for a recently completed loan in Scotland, managed by our BDM, Louise. In this case, the purpose of the loan is far less interesting than the story of the borrower and his family.

What was the agricultural land loan for?

The borrower wanted to purchase four pieces of connected land from his uncle. The land was mostly good-quality agricultural land that would be used to expand the borrower’s arable holdings. To the southern part of the fields was 6 acres of woodland. The borrower had a 50% share in a haulage business, with one of the family members managing the business day to day. This relative had expressed an interest in trying to run his own timber yard and therefore, once purchased, the relative would look to rent the woodland from the borrower.

Overall, the cost of the land and the size of the loan would lead to a LTV of just under 54%, which was within our upper limit of 60%. Banks had been less willing to consider the loan due to the family connection involved in the sale, and the borrower wanted to move quickly, which UK Agricultural Finance were able to accommodate.

The land itself could be accessed from the main road, and lay at the edge of the seller’s property. However, access to the woodland was not ideal, as the only route meant vehicles driving around the periphery of the land. It was suggested that a new access point would more than likely be created. Access is something we always consider when looking at the value of agricultural land.

How did this borrower show our BDM their entrepreneurial skill?

Louise met with the borrower at a local livestock market, which the borrower owned and ran himself. The market had previously become disused, so when the borrower took on the site, it required significant renovation which the borrower completed alongside adding new additional services to the site.

As we saw from the application, the borrower was part owner in a number of businesses, and the mart where Louise met with him is just one of these.  It was clear from spending time with the borrower that he was a good businessman who had the ability of spotting opportunities and who spread his risks between various income streams and businesses. This spread of income and businesses would likely be difficult for a traditional lender to manage. But we are experienced in dealing with complex income streams and have no limit on the number of income streams a borrower can have.

After leaving college, the borrower had set up his own business recycling organics that now runs across 10 sites and supports many local people through both direct employment and local investment. He also farms arable land, mainly for cereal crops, but also with some land in an environmental scheme.

Why do we bother meeting with borrowers and getting to know them?

This borrower was more than just a good businessman, he was also community focused and played a huge role in supporting his local community. This may not have been clear on paper or even over the phone, but when Louise met with him in person, she could fully appreciate his drive and passion for business projects that made money but also benefited the community.

When the borrower bought the mart, it was disused and no longer acted as the community hub it had once been. But the borrower wanted to not only bring back the mart but also create a community space with various local services and small businesses. This site includes a farm shop, post office, café and market, with a range of small business spaces housing local enterprises. He is at an advanced stage in the process of regenerating the site to provide a fully integrated mixed-use employment and services hub. The listed former mart building remains the central feature of the site and has been fully refurbished to a very high standard and is back in active use.

All the fresh produce in the shop is sourced locally from farmers and producers in the area. When there was word that the local post office had to close in the town, the borrower ensured that the service would run from the shop which is still does now. There is quite a mix of businesses on-site – coffee bean grinders, a ukulele maker, a dance school, and a drama school to name a few. All these add to its unique quirky feel.

Additionally, there is a local infrastructure project that will link the mart to local public transport services, which will generate additional footfall.

How do we handle borrowers who are buying from family members?

The borrower brought his uncle to the meeting, which was useful in discussing the sale of the land and the reasons for the sale. The uncle had established a holiday lettings and leisure business on his land, and since then had been gradually selling off the outer areas of his holding to retain the land closer to his home and the tourism business. The uncle wanted to continue to focus on the tourism business, and the sale of land would allow him to invest in this aspect of his holding.

Louise was also able to discuss the information required from the uncle with him directly and ensure he was aware of what notes and information would be needed from his solicitor and in what timescale.

What did the borrower have to say about this Agricultural Land Loan?

“I’m so pleased that the deal finally got over the line, thank you so much for all your help and support. Without you and your team I don’t think I would have been able to make the purchase happen, I really do appreciate all the effort you put into the process. Thank you so much!”