Dairy Diversification: A Scottish Farmer’s Route to Recovery and Growth

From market volatility to succession challenges, farmers are navigating increasingly complex terrain. At UK Agricultural Finance, we see first hand how the right support at the right time can help farming families not only weather the storm but build stronger, more sustainable businesses for the future. This case is a great example of that in action. Our client, a Scottish dairy farmer and successful holiday let operator, came to us seeking funding to modernise his operation, expand his herd, and position his business for long-term success, we were able to provide funding to support both his diversification plans and his business recovery plans.

Taking the Reins During a Difficult Time

Our borrower farms approximately 750 acres across two holdings in Scotland. He took over the running of the business around four years ago following a serious medical event that left his father unable to continue managing the farm.

At the time, the dairy industry was under immense pressure. The milk price had dropped to as low as 13p per litre, down from 32p, placing enormous strain on the farm’s cashflow. The borrower stepped up under challenging conditions, and while he successfully navigated the worst of the downturn, the emotional pressure resulted in a CCJ due to a missed payment on a water bill, which although now fully satisfied, limited his access to traditional finance through the high street.

Despite these hurdles, the borrower remained committed to growing the business, investing in quality, and building on his family’s legacy. A legacy that began in the 1950s when his grandfather secured the tenancy of the original farm due to his strong local reputation. In 1978, the family purchased the land outright, and the borrower has been part of the partnership since the age of 18.

Investing in a More Efficient Dairy Operation

Our loan provided the capital needed to take a significant step forward. The £800,000 facility, structured as a 36-month bridging loan with rolled-up interest for the first 24 months, allowed the borrower to:

• Purchase two additional robotic milkers (£275,000), expanding his setup from four to six.

• Acquire 120 cows (£340,000) to increase herd size and output.

• Invest in shed refurbishment (£175,000) to improve infrastructure.

• Retain a contingency for working capital and flexibility.

This investment supports a move toward greater automation and herd expansion, vital steps for securing improved milk contracts and ensuring the long-term sustainability of the dairy enterprise. With plans to grow further to eight robotic units, the borrower is clearly focused on building a future-ready farming business.

Diversification That Delivers

Alongside the farm, our client also runs a thriving holiday let business, comprising 12 properties, five of which were included in the security for our loan.

Marketed through Cottages.com and Hoseasons, the properties are modernised to a high standard and enjoy consistently positive guest reviews. With an in-house team managing changeovers and laundry, the business is well-run and efficient, generating over £500,000 annually across the full portfolio.

Diversification into tourism has played a crucial role in supporting the business, particularly during times when the dairy operation has faced volatility. It’s a testament to the borrower’s ability to balance traditional farming with modern rural enterprise – a model we increasingly see across our lending portfolio.

Structured Finance Backed by Strong Security

The loan, introduced by James Webster Consultancy, was secured against a robust package of assets, including:

• Approx. 250 acres across two farms

• A range of farm buildings, a biomass unit, and the main farmhouse

• Four holiday lets, plus a large 8-bed property, a 1-bed, and a 4-bed home

The loan-to-value (LTV) stood at under 25%, providing substantial headroom and a strong degree of comfort.

A Sensible Plan for Repayment

From the outset, the borrower demonstrated a clear and credible strategy for repayment. One of the properties within our security is already being marketed, with viewings underway. The potential sale of an adjoining plot with planning consent may also contribute to reducing the outstanding balance.

As the dairy and holiday let businesses continue to grow, the borrower intends to make ad hoc capital repayments during the term. Any residual borrowing may be refinanced with a high street lender once the accounts reflect the improved financial position.

With a well-performing portfolio and additional assets outside of our security, there are multiple routes available to fully repay the loan if required.

Why UK Agricultural Finance?

Traditional lenders may have been unable to look past a historic CCJ, but at UK Agricultural Finance, we take a broader view. We look at the underlying business, the people behind it, and the potential for growth when the right capital is applied.

From my perspective, this borrower embodies the kind of rural entrepreneur we’re proud to support:

“This is exactly the kind of business UK Agricultural Finance is here to back – a hard-working farmer with a clear plan, proven resilience, and a diversified income base. With the right tools, like milking robots and quality accommodation, they’re building a sustainable future in rural Scotland.”

This case highlights how flexible, tailored finance can help farming families modernise, diversify, and thrive – even in the face of setbacks.

If you’re a farmer or rural business owner looking to invest in your future, we’d love to hear from you. Whether you’re exploring diversification, modernising your dairy operation, or simply need a lender who understands the unique pressures of rural life, UK Agricultural Finance is here to help.