Farm businesses that are concerned about cash-flow, but are looking to capture the efficiencies that state-of-the-art machinery can deliver, should consider specialist lending options such as asset finance as one way of financing this type of on-farm investment - according to the leading banking services provider to the sector, Lloyds TSB Agriculture.
Lloyds TSB Agriculture Policy Director
Last year’s poor weather and rising costs mean many farmers intending to invest in tractors, combine harvesters and other kit whilst attending this year’s LAMMA Show at the Newark and Nottinghamshire Showground (16 and 17 January), may feel they do not have the cash available.
Cash-flow challenges need not impact investment ambitions however, as Alick Jones, Lloyds TSB Agriculture Policy Director, explains that there are finance options open to farmers to help them invest in the assets they need.
“The past 12 months have been difficult for many farm businesses and that will have had an impact on the cash available to them,” he says. “It has always been the case that paying for fixed assets such as machinery from day-to-day cash-flow is not always the best solution, and with the exceptional weather seen this season, it is even more important to keep working capital availability at its maximum.
“Specialist lending options such as Hire Purchase are particularly helpful when replacing equipment as they enable the term of the finance to be matched to the life of the asset.”
Hire Purchase is one of the fastest-growing methods of securing finance in agriculture, accounting for more than £1billion of funding lent to the sector.
Over the past three years Lloyds TSB Agriculture’s market share of Hire Purchase lending provided by Lloyds TSB Commercial Finance has increased substantially and is expected to grow further in 2013.
“More and more farmers are seeing the benefits of Hire Purchase as a way to borrow funds without using vital working capital,” Mr Jones says.
“We take the asset as security, which means existing credit lines are left alone - something which is important in this current financial landscape.”
What’s more, with the threshold for Annual Investment Allowances temporarily increased from £25,000 to £250,000 from 1 January 2013, there is potentially a tax benefit to be gained from investing in machinery.
“Whilst we may have a legal tie to the asset, it appears on the farmer’s balance sheet so they can claim the allowances,” Mr Jones says.
“Affordability of finance is important, and with Lloyds Banking Group’s access to the Funding for Lending Scheme, we have discounted loans currently available. This will further help businesses boost their growth plans and invest in their future.”
Farmers interested in discussing their finance options can talk to Lloyds TSB Agriculture’s specialist team at the LAMMA Show and staff will be available to provide instant finance quotes on any piece of kit at the show.
“Having a planned programme of investment in machinery is vital in order to maintain the productivity and efficiency of your business,” Mr Jones adds. “Discussing your options and considering things like Hire Purchase could be a solution.
“If you are looking to buy at LAMMA, a visit to Lloyds TSB Agriculture should be an important part of your decision.”
For more information on Lloyds TSB Agriculture, its specialist banking services for farmers and contact list of specialist agriculture managers, visit www.lloydstsb.com/agriculture.
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