How to Finance a Farm Purchase and Agricultural Land Purchase

how to finance a farm purchase
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    Despite its relatively low returns on capital, farming has always been one of the most secure forms of investment, renowned for being a safe haven and being held in high esteem. But with concerns over our recent departure from the European Union and the implications this has on funding, we ask the question, “what is the best way to finance a farm purchase in order to secure a successful future?”.

    How to finance a farm purchase?

    It’s not always straightforward when it comes to financing farm land, but thanks to short term solutions such as bridging loans, farmers can acquire acres of agricultural land, in their desired location, at the right time and for the best possible price.

    As with the purchase of any major asset, the key to a successful farm purchase is good planning, secure finance and sound advice.

    Whether you want to fund your first small farm, buy expensive equipment, invest in more livestock or acquire additional acres or outbuildings; bridging loans offer a solid financial solution. Here we explain why.

    Why farmland is a good investment

    Climate change and amendments in regulations make traditional forms of farming harder to sustain, which is why farmers are constantly looking for new sources of capital to maintain, grow and improve their business.

    It is true that the purchase of agricultural land has long been considered to be one of the best forms of property investment, but now thanks to the diversity it offers, acquiring farmland is becoming more and more popular. Over and above grazing livestock and the growing of crops and cereals, our countryside is now being utilised for renewable energy resources, such as natural gas, wind and solar farms.

    Although there are no initiatives set up specifically to assist with the purchasing of farmland, vital funding through the EU over the previous decades have helped to subsidise agricultural activity. Post Brexit, the government have pledged to hand out £3bn to farmers to ensure that they continue to feel supported as they strive to enhance our environment and safeguard animal welfare standards.

    At present, demand for farmland exceeds supply and the situation is only set to worsen as the population continues to increase. And although there are laws regarding what you can and cannot build on farmland, recently the regulations have become more relaxed. Constructing new farm buildings for agricultural purposes is generally accepted, but those hoping to develop farmland are now buying on a speculative basis.

    Whether it’s for business diversification, new equipment or refurbishments, a bridging loan can put you one step ahead of the competition. Thanks to the flexibility of a short term bridging loan you can secure the purchase of a farm or agricultural land as soon as it comes up for sale.

    How to finance a farm land purchase

    How to finance a farm land purchase

    Not only has farming come under intense financial pressure in recent times; as farmers look to expand and drive efficiencies through diversification; but the options for purchasing farmland are becoming limited too.

    Being able to act quickly and adapt to changing situations is key to agricultural success, but without outside funding farmers are unable to react. Many farmers find banks are too slow to approve finance for agricultural borrowing or simply refuse, so are turning to short term bridging loans instead.

    Bridging finance is great for those who require high levels of funding when time is of the essence. The main benefits of taking an agricultural and farm bridging loan over traditional forms of lending include:

    • Speed of competition. A bridging loan can be arranged in a matter of days, without completing lengthy credit applications, which means farmers can receive the funding they need, when they need it the most.
    • Flexibility. Most bridging loans that are used to finance farm purchases are bespoke and can be tailored in terms of how long the agreement last for (usually between 1-7 years), how the interest is paid and the conditions of the repayments.
    • Versatility. Bridge finance can be used for a variety of farming purposes including the purchasing of land through to the investing of specialist machinery.
    • Value. Depending on your agricultural requirements, most lenders will evaluate the risks, assets and plans and consider the loan terms and length on a case by case basis. There is no set amount that you can or can’t borrow when taking out a bridging loan, but they are several factors that a lender will look at. These include previous farming experience, clean credit history, good business plan, and a well thought out “exit strategy”. An exit strategy clearly details to the lender how the borrower intends to repay the loan. Money is normally secured against current assets, including farmhouses or outbuildings, until long term finance (such as a mortgage), can be arranged.
    bridging loans for farmers

    Reasons why farmers take bridging loans

    If you are looking to finance a small farm, purchase more land, invest in new machinery, acquire additional livestock or want to carry out improvements to your outbuildings, a bridging loan can help boast your cash flow. Below we list the most common scenarios for farmers requiring bridge finance.

    1. Financing farming diversificationNothing is certain in business, and in farming you place a large reliance on external factors that are out of your control. This is why many farmers are choosing to move away from conventional methods of farming into new business ventures in order to diversify resources, utilise land and reduce their overall risk. This does, however, require upfront funding, often through obtaining a bridging loan.
    2. Financing new farmland – When additional acreage or a unique property opportunity arises at short notice, bridging finance offers the quickest form of funding. The ability to purchase land at auction is exceptionally valuable to farmers who wish to expand their current holdings and is often a great way to bag a bargain.
    3. Financing farm property refurbishments – bridging finance allows farmers to develop, renovate or repair property for capital appreciation and income generation purposes.
    4. Financing new livestock and farm equipment – often as demand increases, farmers need to expand their livestock holdings. Having access to funding fast allows them to increase production before additional quotas and allowances are recouped.
    5. Financing business recovery & restructure – farming often has peaks and troughs and iffinancial pressure becomes acute, then a bridging loan can help with cashflow until the money starts rolling back in.
    6. Financing farm generational transfers – farming is generally considered to be a family business, and often the farm and land itself gets handed down from generation to generation. A bridging loan can be used to purchase the farmland from one farmer to another until a mortgage is secured in a new name.

    Need bridging loan advice?

    Complete our website contact form to make an enquiry.

    Specialists in supplying bridging loans for farmers

    We know that farming is not just a job, it’s a way of life. At Bridging Options, we can help you to secure your financial future so that you can keep farming in your family for generations to come.

    If you have questions about bridging loans and want to speak to an expert in the farming and agricultural industry, then our brokers are available to chat and help you source the very best bridging rates.

    At Bridging Options, we offer loans to help farmers take advantage of short notice opportunities to purchase agricultural land or property. We can also help with the recovery and restructure of your farm when facing severe financial pressures and can provide you with the money, means and know how to diversify and maximise income through other projects.

    For a free, no obligation telephone consultation, call us today or complete our online enquiry form.

    mark piper bridging loan consultant
    Mark Piper

    I am the Senior Consultant at Bridging Options. I have extensive experience in leading successful sales teams at major UK insurers and founding a start-up mortgage brokerage, I bring expertise in residential and commercial property investments. Through strategic collaboration with industry leaders, I am committed to delivering exceptional service and empowering clients to achieve their property investment goals.

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