facebook twitter rss

Plan Don’t Panic in the Face of Cash Flow Challenges

A West Wales land agent is urging dairy and other farmers hit by the downward spike in prices not to panic. Carmarthen based Jonathan Andrews of Llewellyn Humphreys is concerned that the tax bill due in early January will put further pressure on cash flow for some businesses.

Mr Andrews, a partner in Llewellyn Humphreys and an AMC agent, says the problem is that the bill will be based on the profit and loss account of a decent 2013/14 trading year. The current drop in prices coupled with the seasonal flow of feed, fertiliser and fuel invoices makes the bill a particular issue this year.


He advises:
“The trick is to plan, not panic, and to seek advice from those with an objective perspective on what working capital your business will need.

“The default option is usually to seek an extension to the overdraft facility. But remember this will involve a negotiation with the bank manager. The outcome – how much and at what margin – is informed by the strength of the recent set of farm accounts, amongst other things.”

He says an alternative may be to consider a shorter term loan that can provide a more reliable source of working capital to the business or to re-structure finances. Such a strategy can be invaluable in overcoming short term cash flow issues, such as those caused by market fluctuations, with some loans allowing repayments to be set to suit incomes and outgoings for that specific business.

And Mr Andrews adds:
“AMC’s own Flexible Facility is in effect a rolling five year loan which has a set margin and no annual reviews or price increases. There is a simple annual fee and the repayments can be tailored to suit cash in-flows.”

“Funds can also be drawn down to settle for example the tax bill or the feed fuel or fertiliser invoices,”

He explains that another alternative is to restructure debt to offer cost savings over the longer term. Borrowers should consider loans that offer a choice of interest-only or annuity repayment terms and the potential to have a capital repayment holiday from the outset.

Fixed or variable rates of interest or combinations of ‘all of the above’ should also be considered as best suits the business need. The first step is to seek advice from an objective perspective and investigate options.

Llewellyn Humphries

Related Links
link Rural Business Anger at Inadequate Mobile Coverage
link Scotland's CAP Decisions a Leap in the Dark
link Are you Getting the Electricity Wayleave Compensation you are Entitled to?
link Positive Outlook for Agriculture Sector Despite Short Term Pain

Stackyard News   xml