Sensible Financing For young person wishing to take over farming family farm

[Richaroundwash]

Hello all, could anyone steer me in the right direction please. I have access to a small family farm with members wanting to take a back seat. My idea is to help them do that, i am passionate farming and wish to carry it on somehow but my issue is financing it sensibly. I need to make investment of one or two major bits of kit in order to update and do the job more efficiantly but I dont have the capital to start the ball rolling. I have earmarked one or two sensible second hand bits of kit that would do the job fine, if I could only pay for it. Has anyone bright ideas on how I could do thisand who best to approach? I am from a family where borrowing was never an option and we always pay for what we get, hence the need for investment and little knowledge about this subject. Any sensible impartial advice would be much appreciated.

[saltoun]

Much more civilised than arsenic! In the first instance I'd speak to the current farmers banker.Draw up a bit of a business plan.It doesn't need to be too detailed,indeed it can't be at this stage.See what he has to say about it. Is the farm to be a full time occupation or will you be earning income elsewhere?

[Farmer Ted]

A little bit more information would help, what are the pieces of kit? Are they really necessary for you to start farming? What level of financing do you require?

[Courier]

Much more civilised than arsenic! In the first instance I'd speak to the current farmers banker.Draw up a bit of a business plan.It doesn't need to be too detailed,indeed it can't be at this stage.See what he has to say about it. Is the farm to be a full time occupation or will you be earning income elsewhere?

There is a lot to be said for the old fashioned "don't buy it if you have to borrow" approach but it is an option only available to a fortunate few.

A business plan is certainly needed but before following a cash flow projection build in a 50% contingency fund in case we get disastrous weather for the next two years. And remember those who can afford the cost of insurance probably don't need it.

Good luck.

[Richaroundwash]

Much more civilised than arsenic! In the first instance I'd speak to the current farmers banker.Draw up a bit of a business plan.It doesn't need to be too detailed,indeed it can't be at this stage.See what he has to say about it. Is the farm to be a full time occupation or will you be earning income elsewhere?

Thanks for your reply, it will be run as a part time operation to a) give me additional income, b) carry on practicing what i preach as agronomist c) help aid family members have some form of retirement and easier life with the option of letting them 'do a bit' if they want to.

[Richaroundwash]

Detail inc without being too specific on here ; sub 300 acres, some reasonable kit for using...self propelled 24m, a decent tractor, but additional tractor or two, telehandler and plough need replacement desperately. Option of hire may be a sensible one but really 2 tractors ( the one we have now + additional one is really a requirement)

also would anyone have an idea what I can hire a pearson enterprise 2 row potato harvester out for ( just the harvester alone), per day, hour, acre, hec? Reasonable nick, but certainly not a high value on -ie sub 5k value.

Thank you all.

[Tullyvernon]

Are all those pieces of equipment essential right away? Will purchasing those items bring in more money to the farm than before? How is the farm managing at present without the equipment?

I would be inclined to get started running the farm for a wile first before I would jump in and start spending, would getting a contractor in for the first wile not be an option?

[Farmer Ted]

I would maybe try to hire machinery to start you off, or use a contractor. If you are set on buying equipment, as timeliness can be key to a good harvest, then there are a lot of brokers who will place asset finance with companies such as BNP Paribas, Hitachi Capital, Northridge etc, the rates aren't too high.

[LALANS]

Hello all, could anyone steer me in the right direction please. I have access to a small family farm with members wanting to take a back seat. My idea is to help them do that, i am passionate farming and wish to carry it on somehow but my issue is financing it sensibly. I need to make investment of one or two major bits of kit in order to update and do the job more efficiantly but I dont have the capital to start the ball rolling. I have earmarked one or two sensible second hand bits of kit that would do the job fine, if I could only pay for it. Has anyone bright ideas on how I could do thisand who best to approach? I am from a family where borrowing was never an option and we always pay for what we get, hence the need for investment and little knowledge about this subject. Any sensible impartial advice would be much appreciated.

Do not do it.
By this I mean invest in new/secondhand kit. All this is, is deferred scrap. At this stage in your business development your mantra should be 'stock, seed and fertilisers', all else is expensive luxuries that you cannot afford. For you cash is king. It will be cheaper to use a contractor or join a machinery ring. You will then have an accurate record of costs, no hefty repair bills, no crippling HP/Lease charges as well as getting the v best kit with a skilled operator.
To a lender you are a bad risk hence you will pay top rates of interest and probably have to put down a large deposit. All you will succeed in doing is hoovering up any working capital to the detriment of your 'stock, seed and fertiliser' Any cash you have has an opportunity cost and to you the best return will be in SSF not scrap.
As an old farmer told me many years ago 'laddie it's not what you can do with it's what you can do without that makes you money'.

[MC130]

Detail inc without being too specific on here ; sub 300 acres, some reasonable kit for using...self propelled 24m, a decent tractor, but additional tractor or two, telehandler and plough need replacement desperately. Option of hire may be a sensible one but really 2 tractors ( the one we have now + additional one is really a requirement)

also would anyone have an idea what I can hire a pearson enterprise 2 row potato harvester out for ( just the harvester alone), per day, hour, acre, hec? Reasonable nick, but certainly not a high value on -ie sub 5k value.

Thank you all.

If you really need 2 tractors would a second one with a decent loader not be a cheaper option than a tractor and a telehandler, just to get you started.

[wastedyears]

Do not do it.
By this I mean invest in new/secondhand kit. All this is, is deferred scrap. At this stage in your business development your mantra should be 'stock, seed and fertilisers', all else is expensive luxuries that you cannot afford. For you cash is king. It will be cheaper to use a contractor or join a machinery ring. You will then have an accurate record of costs, no hefty repair bills, no crippling HP/Lease charges as well as getting the v best kit with a skilled operator.
To a lender you are a bad risk hence you will pay top rates of interest and probably have to put down a large deposit. All you will succeed in doing is hoovering up any working capital to the detriment of your 'stock, seed and fertiliser' Any cash you have has an opportunity cost and to you the best return will be in SSF not scrap.
As an old farmer told me many years ago 'laddie it's not what you can do with it's what you can do without that makes you money'.

You are of course welcome to your opinion, but you are wrong. One of my biggest regrets is not spending more on tackle at the start of my farming career . What the OP needs to decide is whether he does the work himself or not. If it is a not then he should keep almost no equipment at all, if he wants to do the work then , within reason, he should get the best kit he can afford that will do a reasonable job within a reasonable timeframe. Part of the skill of being a farmer is knowing what tackle to buy and at what price the farm can afford. As we all know failure to keep away from shiny paint that a business can't afford has been the end of many a farm enterprise.People think that contractors are cheap, perhaps for really specialist jobs where the farmer isn't sure whether he will be doing it for long they are but for people who are here to stay in a particular crop or enterprise they aren't. All the shiny machines and men are to pay for so if you can stand the shame of some secondhand stuff and are able to look after it you will be quids in.

[tje]

You are of course welcome to your opinion, but you are wrong. One of my biggest regrets is not spending more on tackle at the start of my farming career . What the OP needs to decide is whether he does the work himself or not. If it is a not then he should keep almost no equipment at all, if he wants to do the work then , within reason, he should get the best kit he can afford that will do a reasonable job within a reasonable timeframe. Part of the skill of being a farmer is knowing what tackle to buy and at what price the farm can afford. As we all know failure to keep away from shiny paint that a business can't afford has been the end of many a farm enterprise.People think that contractors are cheap, perhaps for really specialist jobs where the farmer isn't sure whether he will be doing it for long they are but for people who are here to stay in a particular crop or enterprise they aren't. All the shiny machines and men are to pay for so if you can stand the shame of some secondhand stuff and are able to look after it you will be quids in.

Completely agree !

[wellington53]

Do not do it.
By this I mean invest in new/secondhand kit. All this is, is deferred scrap. At this stage in your business development your mantra should be 'stock, seed and fertilisers', all else is expensive luxuries that you cannot afford. For you cash is king. It will be cheaper to use a contractor or join a machinery ring. You will then have an accurate record of costs, no hefty repair bills, no crippling HP/Lease charges as well as getting the v best kit with a skilled operator.
To a lender you are a bad risk hence you will pay top rates of interest and probably have to put down a large deposit. All you will succeed in doing is hoovering up any working capital to the detriment of your 'stock, seed and fertiliser' Any cash you have has an opportunity cost and to you the best return will be in SSF not scrap.
As an old farmer told me many years ago 'laddie it's not what you can do with it's what you can do without that makes you money'.

I agree with this, especially the stock feed and feriliser bit, one step at a time and keep it simple.

[Richaroundwash]

Thank you everyone for your advice, valid points from everyone. Tractor +loader would make sense i agree, i have found im fairly sensible about making decisions on decent good second hand kit snd by no means rush into things, but for sure try to grab them if right as good stuff doesnt hang about long. Maybe it sounds silly but I actually enjoy doing the work, seeing a quality product, looking after and getting set up with the right kit on budget without being lavish with cash. getting a contractor would take out what kick i get out of it, but maybe some specialist jobs could be farmed out to a contractor. And yes I agree, quality inputs are certainly a high priority. I understand that many of the costs are the same to grow a bad crop as it is to grow a good crop. I am trying to turn the farm to quality and yield with the expense of slighty higher input costs, especially when MOI costs are calculated much of it is a no brainer.
Its always a difficult one what kit to have and not to have, when the job becomes a chore because things are old and worn out it takes what little kick we get, out. I simply want the job to be manageable, easy, tidy and productive without being flash or trendy. Getting hands on decent size older kit more than adequate for a small farm is almost getting easier as stuff gets ever bigger and obsolete to some.
People may think its a pipe dream and please tell me if that is your opinion, I appreciate different view points on which I can maybe draw some positive on. Thank you.

[Phil]

You are of course welcome to your opinion, but you are wrong. One of my biggest regrets is not spending more on tackle at the start of my farming career . What the OP needs to decide is whether he does the work himself or not. If it is a not then he should keep almost no equipment at all, if he wants to do the work then , within reason, he should get the best kit he can afford that will do a reasonable job within a reasonable timeframe. Part of the skill of being a farmer is knowing what tackle to buy and at what price the farm can afford. As we all know failure to keep away from shiny paint that a business can't afford has been the end of many a farm enterprise.People think that contractors are cheap, perhaps for really specialist jobs where the farmer isn't sure whether he will be doing it for long they are but for people who are here to stay in a particular crop or enterprise they aren't. All the shiny machines and men are to pay for so if you can stand the shame of some secondhand stuff and are able to look after it you will be quids in.

Absolutely spot on.

[wastedyears]

Thank you everyone for your advice, valid points from everyone. Tractor +loader would make sense i agree, i have found im fairly sensible about making decisions on decent good second hand kit snd by no means rush into things, but for sure try to grab them if right as good stuff doesnt hang about long. Maybe it sounds silly but I actually enjoy doing the work, seeing a quality product, looking after and getting set up with the right kit on budget without being lavish with cash. getting a contractor would take out what kick i get out of it, but maybe some specialist jobs could be farmed out to a contractor. And yes I agree, quality inputs are certainly a high priority. I understand that many of the costs are the same to grow a bad crop as it is to grow a good crop. I am trying to turn the farm to quality and yield with the expense of slighty higher input costs, especially when MOI costs are calculated much of it is a no brainer.
Its always a difficult one what kit to have and not to have, when the job becomes a chore because things are old and worn out it takes what little kick we get, out. I simply want the job to be manageable, easy, tidy and productive without being flash or trendy. Getting hands on decent size older kit more than adequate for a small farm is almost getting easier as stuff gets ever bigger and obsolete to some.
People may think its a pipe dream and please tell me if that is your opinion, I appreciate different view points on which I can maybe draw some positive on. Thank you.

Your logic is correct and I am sure you will be successful, I found that driving the sprayer and combine taught me more about cropping than anything else I had come across. And of course you are an agronomist which should be a great combination. Writing out cheques for tackle hurts at the time but as the years go quickly by you will be amazed at how much ground you have covered.

[LALANS]

You are of course welcome to your opinion, but you are wrong. One of my biggest regrets is not spending more on tackle at the start of my farming career . What the OP needs to decide is whether he does the work himself or not. If it is a not then he should keep almost no equipment at all, if he wants to do the work then , within reason, he should get the best kit he can afford that will do a reasonable job within a reasonable timeframe. Part of the skill of being a farmer is knowing what tackle to buy and at what price the farm can afford. As we all know failure to keep away from shiny paint that a business can't afford has been the end of many a farm enterprise.People think that contractors are cheap, perhaps for really specialist jobs where the farmer isn't sure whether he will be doing it for long they are but for people who are here to stay in a particular crop or enterprise they aren't. All the shiny machines and men are to pay for so if you can stand the shame of some secondhand stuff and are able to look after it you will be quids in.

How many times I have heard this crap spouted by farmers up to their eyes in debt. If you want fancy machines to get yours rocks off to then crack on. You will at least get driven to the bankruptcy court in some comfort.
It is about making money and securing a decent income stupid.
I have spent too long as an advisor not to recognise the road to ruin. Use your brain, its not just to keep your ears apart.

[Phil]

Thank you everyone for your advice, valid points from everyone. Tractor +loader would make sense i agree, i have found im fairly sensible about making decisions on decent good second hand kit snd by no means rush into things, but for sure try to grab them if right as good stuff doesnt hang about long. Maybe it sounds silly but I actually enjoy doing the work, seeing a quality product, looking after and getting set up with the right kit on budget without being lavish with cash. getting a contractor would take out what kick i get out of it, but maybe some specialist jobs could be farmed out to a contractor. And yes I agree, quality inputs are certainly a high priority. I understand that many of the costs are the same to grow a bad crop as it is to grow a good crop. I am trying to turn the farm to quality and yield with the expense of slighty higher input costs, especially when MOI costs are calculated much of it is a no brainer.
Its always a difficult one what kit to have and not to have, when the job becomes a chore because things are old and worn out it takes what little kick we get, out. I simply want the job to be manageable, easy, tidy and productive without being flash or trendy. Getting hands on decent size older kit more than adequate for a small farm is almost getting easier as stuff gets ever bigger and obsolete to some.
People may think its a pipe dream and please tell me if that is your opinion, I appreciate different view points on which I can maybe draw some positive on. Thank you.

Sounds like you have a lot of common sense & already know what you want to do.

All this talk from some about machinery just being a potential pile of scrap iron is, to be perfectly blunt, complete & utter cobblers !
Buy the right kit at the right price...and more importantly look after it, and you will be better off than relying on contractors. It is very difficult to put a price on being able to pick up the machine & go when you want to or when the job needs doing.
The ones that claim machinery is a bad investment & that it will just end up rusting away are probably the sort of people that don't like or understand machinery too well...or they are the sort that will abuse it & never maintain it ?

I am in a similar position as yourself in that we changed our cropping policy this Spring.
We have, and have always had, a range of cultivation equipment...but have not had our own Sprayer or fertilizer spreader for 8 or 9 years.
This year we have paid our neighbour somewhere in the region of £1,600.00 for spraying & fertilizer spreading...this will rise next year to well over £2,200.00.
We have the tractor, so this is a job I can easily do myself, we are therefore just in the process of buying a good second hand Sprayer & will look at getting a good second hand fertilizer spreader in the Spring.

One final point - paying a contractor is dead money, a proportion of what you pay is for the kit (how else could they afford it)...but, having paid him £££££££ throughout the year you have no asset value to show for it !
So long as you don't go overboard investing in good quality second hand kit, and looking after it properly, is not the "financial suicide" that some people would have you believe it is !

[Phil]

How many times I have heard this crap spouted by farmers up to their eyes in debt. If you want fancy machines to get yours rocks off to then crack on. You will at least get driven to the bankruptcy court in some comfort.
It is about making money and securing a decent income stupid.
I have spent too long as an advisor not to recognise the road to ruin. Use your brain, its not just to keep your ears apart.

Don't recall anyone mentioning "fancy machines" ??

It is all to do with striking a happy balance.
Now there is no way anyone should consider forking out the sort of capital required for combines, foragers or even some of the big balers & drills etc, unless of course they have the area that can justify that sort of Capital expenditure.
But the OP is referring to one or two bits of relatively low priced second hand kit !!!

Maybe before stating how "it is all about making money & securing income", & then referring to people as Stupid....and then offering advice as to what their brain is for (and surely it's the Skull that "keeps your ears apart") You should first read the posts properly & understand what people have actually said !

[wastedyears]

How many times I have heard this crap spouted by farmers up to their eyes in debt. If you want fancy machines to get yours rocks off to then crack on. You will at least get driven to the bankruptcy court in some comfort.
It is about making money and securing a decent income stupid.
I have spent too long as an advisor not to recognise the road to ruin. Use your brain, its not just to keep your ears apart.

This post is correct but in relation to a different situation, not this one or mine. I have no need or time for a spat on here, I urge you to re-read the posts above.

[MC130]

How many times I have heard this crap spouted by farmers up to their eyes in debt. If you want fancy machines to get yours rocks off to then crack on. You will at least get driven to the bankruptcy court in some comfort.
It is about making money and securing a decent income stupid.
I have spent too long as an advisor not to recognise the road to ruin. Use your brain, its not just to keep your ears apart.

If you're an advisor, your 'bedside manner' leaves alot to be desired. The OP came on here looking for some advice, not to be talked down to like a child.
Your opinion may well be valid but ramming it down peoples throat in such an unpleasant manner is just as likely to have the opposite effect.

[fergieman]

If you're an advisor, your 'bedside manner' leaves alot to be desired. The OP came on here looking for some advice, not to be talked down to like a child.
Your opinion may well be valid but ramming it down peoples throat in such an unpleasant manner is just as likely to have the opposite effect.

Well said.

Seems like an adviser with a chip on shoulder.

[David.]

Kit does not need to be fancy, it needs to be big and reliable enough to get the work done in the few weather windows available.
I resent buying all the toys for somebody else, that I can not myself afford. With the exception of specialist operations, contractor charges usually equate nearly to what you could do the job for yourself; as Phil has said, you have nothing tangible stood in the yard to show for all the money you have parted with.

[stu b]

My view would be that depending on how much business you do as an agronomist that it is virtually impossible to run the two jobs together, even though they sound likes natural fit.
as an agronomist, what are you mainly walking?
if just cereals,then you you will have enough time to combine etc in the summer as your customers will be doing the same, but if you are walking potatoes and veg etc then there will be a conflict.
If you area spud farmer then how will you walk osr and cereal crops in the autumn when you need to dig and grade spuds.
also how will you make time to plant spring crops if you need to walk strops for spring fungicides etc.

I have a mixed farm with beef and sheep and about 500 acres of arable and I only just have time to walk my own crops and had to drop any thoughts of becoming an independent after leaving my old job.

i'm just trying to point out that to run the two together you have to be very organised otherwise both sides will end up suffering.

[Grassman]

Nothing wrong with a few bits of good secondhand machinery.
Just be sensible when sourcing it.I often buy machinery and run it five years or more and lose very little money. Far more sensible than standing watching a contractor doing what you could be doing.

Also a lesson you have probably just learnt is take advise from advisors. Not lectures!!!

[LALANS]

Don't recall anyone mentioning "fancy machines" ??

It is all to do with striking a happy balance.
Now there is no way anyone should consider forking out the sort of capital required for combines, foragers or even some of the big balers & drills etc, unless of course they have the area that can justify that sort of Capital expenditure.
But the OP is referring to one or two bits of relatively low priced second hand kit !!!

Maybe before stating how "it is all about making money & securing income", & then referring to people as Stupid....and then offering advice as to what their brain is for (and surely it's the Skull that "keeps your ears apart") You should first read the posts properly & understand what people have actually said !

Phil
We should meet up for a pint or 10 we could have a cracking discussion.
The point here is best use of limited resources. Tying up precious capital on machinery which could be hired far more cheaply is the point. Obviously theyoung man in question has the bare minimum required rest brought in.
Here's an example just to show how some folk lose the focus.
A few years ago I was asked by a bank to visit a farmer who they were worried about as his O/D was getting out of control. £350K at the time and little chance of getting it reduced. Paying +3 over base or 8%.
Drew up a plan and cashflows which were to be monitored monthly. Got bank off his back, or so I thought. Went back after a month and O/D had gone up by £20K, Should have dropped by same amount if plan had been followed. Turns out farmer, I shall call him Shit for Brains, gad bought a new muck spreader. When I pointed out that he only needed it for max 5 days a year and the local contractor was a lot cheaper he gave the old 'but what if I can't get him when the weather suits crap' (you certainly won't get him if you phone up the night before is what I thought) S for B could comprehend that the machine was costing him £1600/annum yet by using a contractor would have cost him £500 plus diesel in addition the contractor provided a loader as well. Wouldn't listen.
Came back the following month to check progress. Fuck me the O/D had risen another £40K. S for B had only gone and bought a new tractor. Old one wasn't man enough for the new spreader and JD had given him a 5% discount if he paid 'cash' Pointed out that by paying 'cash' as he saw it was costing him £3200 in interest pa plus bank charges, it had put him up to his limit and that the bank would pull the plug if it continued.
So here we were a new tractor , a new spreader and O/D maxed out.
Harvest comes, bank says 'hoy we want this O/D reduced'. Wheat to sell at harvest. Pretty shit trade at the time ~£85-90/tonne but if you could hold it until Dec looking at £120+/tonne. No wriggle room so wheat sold into a buyers market, fire sale if you like, for £80/tonne. Had he been able to wait, which would have been possible if he hadn't pissed £60K against a wall, he would have netted an extra 20K. O/D would have been £320K instead of £400K and would have saved £6K+ in interest.

I have more examples such as this so. The young man here is to be commended in wanting to farm in his own right but such examples as above are a lesson, yes these guys were farming in their own right but it wasn't long before the bank was dictating.


In any event advice is freely given whether folk take it is entirely up to them.

[saltoun]

Lalans,
I see what youre saying.But if the OP has "shit for brains" he's going to fail in this venture regardless.If he acts with the stupidity shown in your example above,he will fail.However,he doesn't come over as being stupid.He comes over as being sensible.He came on here to get some advice to help him come to a rational decision.Investing a wee bit of money in some prudent purchases may well be a good idea.

[MC130]

In any event advice is freely given whether folk take it is entirely up to them.

Yes, and the manner in which it's given can make the difference between the advice being heeded and the recipient saying "f**K you!" and carrying on regardless.

[spin cycle]

on the face of it ...a fantastic opportunity.....you havn't mentioned what 'help' you have available...if family members want to 'keep their hand in' and supplement their pension etc......the only reason i ask is that a spud harvester needs trailers alongside and i was sort of assuming you would be 'on your todd'

the first thing i would do is aim to 'make the best of what i've got' and then try and spread the work .....i'd let the potato land ...then follow that with spring barley...then wheat. will the remaing acreage allow a rotation with osr then more wheat then winter barley as entry for osr? what about maize ad? ....could be an entry for wheat or follow spuds?

you've got a decent sprayer and a tractor...fert spinner?....if so 'agronomy' covered

how do you establish your cereals? i hate using contractors but ,unless you've family labour available, a ploughing contractor in the autumn seems a must...you could then use the tractor you have with a combination in behind?....a cheap plough on the tractor you have can do the winter ploughing....then back in with the combination springtime....establishment covered

do you have a combine? it sounds like you may have sheds/trailers for spuds?....assuming that....one trailer dropped in field while with the tractor ferries the full one back to the yard and tips....either straight on deck or into a spud elevator?

so plough £1500, good combination £6000, telehandler (i think you need one....just to handy) £10,000....£17500

or stretch the budget to £25000 and spend £7500 on an oldish,but decent, second tractor?

£25k over 5 years...guessing circa £7200/year...£24/ac............gosh thats alot of interest though

anyway thats my take

[Zetor]

Hello all, could anyone steer me in the right direction please. I have access to a small family farm with members wanting to take a back seat. My idea is to help them do that, i am passionate farming and wish to carry it on somehow but my issue is financing it sensibly. I need to make investment of one or two major bits of kit in order to update and do the job more efficiantly but I dont have the capital to start the ball rolling. I have earmarked one or two sensible second hand bits of kit that would do the job fine, if I could only pay for it. Has anyone bright ideas on how I could do thisand who best to approach? I am from a family where borrowing was never an option and we always pay for what we get, hence the need for investment and little knowledge about this subject. Any sensible impartial advice would be much appreciated.

So how have your family farmed the farm in the previous years, would you be taking over their kit?