How to Finance the Purchase of Agricultural Land

Opportunities to buy agricultural land do not always arrive at a convenient time. A neighbouring field may become available, an additional farm may come onto the market or a property may be offered at auction with a relatively short completion deadline.

For farmers and landowners who do not have the capital available to complete the purchase outright, land acquisition finance can provide a way to secure the opportunity and support the future growth of the agricultural business.

At UK Agricultural Finance, we provide finance for the purchase of agricultural land across England, Scotland and Wales. Our loans are secured against agricultural land and property and can be tailored to the circumstances of the individual purchase. 

Why Are You Buying the Land?

One of the first things a lender will want to understand is why you are making the purchase.

You might be adding neighbouring acreage to an existing farm, acquiring another holding or purchasing land to create additional capacity within the business. In other circumstances, the opportunity may form part of longer-term plans for growth or diversification.

Being clear about the purpose of the purchase helps demonstrate how the new land fits into the wider agricultural business.

It is also important to consider what you intend to achieve financially. UK Agricultural Finance takes a responsible approach to lending, so borrowers should be able to explain how the purchase adds value to the business and how the borrowing will ultimately be repaid.

How Much Can You Borrow to Buy Agricultural Land?

The amount available will depend on the circumstances of the borrower, the value of the security and the proposed purchase.

UK Agricultural Finance currently provides loans from £100,000 to £10 million, with lending available up to 65% of the value of the agricultural land and buildings against which the loan is secured. Typical loan durations are between 12 and 84 months. 

This makes understanding the value of the property being offered as security an important part of preparing for agricultural land finance.

An independent valuation forms part of the lending process, so farmers should avoid basing their funding plans solely on their own estimate of what land or property is worth.

What Can Be Used as Security?

UK Agricultural Finance loans are secured against agricultural land and property.

The security does not necessarily have to be limited to the land being purchased. Depending on the circumstances, existing agricultural land and property may form part of the security available for the loan.

When considering land purchase finance, it can therefore be useful to look at the wider asset position of the farming business rather than considering the new acreage in isolation.

You should also be prepared to provide details of the relevant property, including title numbers and addresses, as the application progresses. As explained in our guide to preparing for a farm loan application, having the necessary financial and property information ready can help the underwriting process move more efficiently. 

What if the Land Purchase Needs to Happen Quickly?

Speed can be particularly important when buying farmland.

An attractive parcel of neighbouring land may generate considerable interest, while agricultural property purchased at auction will usually have a fixed deadline for completion.

UK Agricultural Finance can provide an Offer in Principle ahead of an auction, allowing a prospective buyer to understand the cost of finance before bidding. Once an auction has been won, completion will typically be required within 28 days or less. 

Having your funding requirements, available security and repayment strategy clear from the beginning can therefore be particularly valuable when a land acquisition is time-sensitive.

What if There Are Issues With the Land?

Not every agricultural land purchase is straightforward.

Access rights, drainage problems, invasive species or other property-specific issues can make some lenders more cautious about a proposed acquisition.

As a specialist agricultural lender, UK Agricultural Finance will consider agricultural property where these types of issues are present. The important point is to identify potential complications early and provide the information needed to understand them. 

Have a Clear Repayment or Refinancing Strategy

Securing the land is only one part of the funding plan. Borrowers also need a credible strategy for repaying or refinancing the loan.

In some cases, short or medium-term agricultural finance can enable a farmer to complete a purchase before moving to cheaper, longer-term finance later. Early redemption terms vary between products, so borrowers considering refinancing should discuss this at the outset and check the terms set out in their Facility Letter.

The right approach will depend on the purchase, the existing business and its finances.

Preparing to Finance an Agricultural Land Purchase

Buying additional farmland can create opportunities to expand production, increase the size of an existing holding or support the next stage of a rural business.

Before seeking finance, be ready to explain what you want to buy, how much you need, why the acquisition makes commercial sense, what security is available and how the borrowing will be repaid.

UK Agricultural Finance provides agricultural land finance across England, Scotland and Wales, with a team experienced in assessing rural property and agricultural businesses.

If an opportunity to purchase land has arisen and you would like to understand your financing options, contact UK Agricultural Finance to discuss the purchase, timescale and funding you require.