How Can Renewable Energy Construction Finance Help Farmers Fund New Projects?

Renewable energy projects can offer farmers and landowners opportunities to diversify their businesses, generate additional income and make better use of agricultural land. However, developing a project often requires significant investment before it becomes operational and starts generating a return.

For agricultural businesses investing in solar, wind, biomass or hydropower, renewable energy construction finance can provide funding during the development stage, with the potential to refinance onto longer-term borrowing once the project is operational.

At UK Agricultural Finance, we provide renewable energy finance for farmers and landowners across England, Scotland and Wales, helping businesses access funding tailored to their projects.

How Does Renewable Energy Construction Finance Work?

Developing a renewable energy project can involve considerable expenditure before it begins generating income.

Construction costs may include purchasing equipment, installing infrastructure, completing associated works and connecting the development to the grid.

Renewable energy construction finance can help bridge the gap between these initial costs and the point at which a project becomes operational.

UK Agricultural Finance provides funding for established renewable energy technologies with established off-take arrangements. This can allow farmers to progress commercially viable developments without necessarily selling equity in their projects.

For borrowers, the important consideration is how the finance supports construction and how the borrowing will ultimately be repaid or refinanced.

Why Might Farmers Need Specialist Construction Finance?

Renewable energy developments can have funding requirements that differ from traditional agricultural investments.

Construction schedules, equipment deposits and project deadlines can create situations where funding is needed before a development begins generating revenue.

Specialist agricultural finance can provide an alternative where conventional lenders cannot accommodate the required timescales or security arrangements.

One example is a biomass energy project supported by UK Agricultural Finance.

The borrowers operated a large family-owned poultry business and wanted to install a biomass plant to generate heat and power.

Although their existing bank was willing to lend, it could not guarantee funding within the required timeframe. A delay risked the borrowers losing their renewable energy tariff and equipment deposit.

UK Agricultural Finance provided a £3.5 million loan secured against agricultural land and property, enabling the business to access the funding it required.

The arrangement also demonstrated how security can be considered across a wider agricultural business, rather than being restricted to the renewable energy development site itself.

Can Renewable Energy Projects Be Refinanced Once Operational?

Construction and operation are two distinct stages of a renewable energy project, and the most appropriate financing arrangements may change between them.

During construction, funding is needed to complete the development before it begins generating income.

Once operational, a project may be able to demonstrate a more established income stream, potentially making longer-term refinancing available.

This approach can allow farmers to use construction finance to progress a development before seeking alternative borrowing arrangements once the project is generating revenue.

UK Agricultural Finance has previously supported a hydropower project where construction funding helped the development progress before refinancing with longer-term finance.

For farmers considering this approach, it is important to have a realistic refinancing strategy from the outset. The ability to refinance will depend on the project’s performance, available security and the lending criteria of the refinancing provider.

Some UK Agricultural Finance loans may also have early redemption charges, particularly during the initial years. Borrowers should therefore review their individual loan terms and any applicable charges when planning to refinance.

What Should Farmers Consider When Planning Construction Finance?

Before seeking funding, farmers should have a clear understanding of the total construction costs, the expected development timescale and how the completed project will generate income.

It is also important to consider the agricultural land and property available as security, alongside any existing borrowing arrangements.

UK Agricultural Finance offers loans from £100,000 to £10 million, with lending available up to 65% of the value of the agricultural land and buildings used as security.

A credible repayment or refinancing strategy is essential, particularly where the intention is to move from construction finance to longer-term borrowing.

For farmers considering solar developments specifically, our guide to financing a solar project on agricultural land explains the planning, grid connection and application considerations in more detail.

Supporting Renewable Energy Projects from Construction to Operation

Renewable energy developments can create valuable opportunities for agricultural businesses, but securing appropriate finance during construction is an important part of bringing a project into operation.

Whether funding a biomass installation, hydropower development or another established renewable energy technology, construction finance can help farmers manage upfront investment while preparing for longer-term funding arrangements.

At UK Agricultural Finance, we take a personalised approach to agricultural lending, considering the individual project, available security and proposed repayment strategy.

If you’re planning a renewable energy project and would like to explore your construction finance or refinancing options, contact UK Agricultural Finance to discuss your requirements with our team.