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

  1. #61
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by Phil View Post
    Steady up...the winky smiley should have been a bit of a give away that my comments were very much tongue in cheek ? Sorry if I "struck a nerve".

    And there are those that would no doubt argue that I never had the plot in the first place.
    I have plenty of new tack and good used machinery that I've acquired without any hp at all, just sensibly using the overdraught to my advantage.

    the chap with the landy is the guy we all see around the market from time to time, probably seen more in farming and more disasters in his life regarding his business than we will ever see. he puts a bit away for a rainy day, or bad year and has been so close to losing the farm a few times that he's scared of spending to much and risking everything.
    they are on the other extreme to the big spender (we all know them) you can't blame the old guy for not spending, as most were brought up with no subsidy like we have now, it was more hand to mouth then, as I said cash is king to them.

    there is a happy medium between the two, borrowing a bit and keeping just enough for a rainy day, or snowy like last year.

    nothing personal fella, I just believe big borrowing isn't the only way
    good luck to the op

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    Senior Member b slicker's Avatar
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    Re: Sensible Financing For young person wishing to take over farming family farm

    It's usually the husband who does the borrowing and the wife who does the worrying.

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

    Quote Originally Posted by b slicker View Post
    It's usually the husband who does the borrowing and the wife who does the worrying.
    Or the husband who does the borrowing and the wife who does the spending.

  4. #64
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by Panzer IV View Post
    If your issue with Lalans is the way he delivers his message, then you need to look in the mirror and wonder if your not a bit soft for this game. I think he's hit the nail on the head.

    I have a friend who works in finance, and he loves farmers. Because they generally have no business sense *whatsoever*. They see shiny mettle at the shows, do the 'Man Maths' and convince themselves of every excuse to buy it. He happily obliges because unlike any other industry where the margins over cost are wafer thin, farmers win a lottery of 357 Euros/Ha every year, and thats the difference between commercial reality and 'cloud cuckoo land' business principles.
    And when the *really* crap ones go bust, they can call the debt in on the land not the kit (owner occupier) or charge extortionate rates from day 1 to cover the likely risk (tenants). The trick is milking all the payments from the farm without killing the cow completely.

    Richard, you have one tractor, and you only have 1 backside to sit on its seat. That tractor will sit in a shed for 10 months of the year gathering dust, it doesnt need another one for company. If you cant double shift the existing one with available labour (part time existing farmer keeping his hand in etc, while you do the day job) then hire in a 'man with tractor' to keep the machinery costs proportional to the work done day by day and season by season. Cash flow without financial indebtedness.

    How much security of tenure do you have?
    Have you got everything in writing?
    Do you know for certain that you have the ability to use or sell the existing kit?
    Do you have the financial clout to finance a growing crop all the way through from sowing through the lean month to payment 28 days after uplift?
    Its amazing what 7 days can do to a decision to purchase new kit. When the adrenaline rush has gone, you look back at the cost versus benefits and think "**** that" .
    Go for it, but remember, "No one ever said it was gonna be easy".
    Thanks for the comment Panzer was starting to think I had gone OTT. Sometimes tough love is what's required.
    Good luck Richard. When you are STARTING TO BE TEMPTED BY SHINY NEW MACHINES JUST THINK OF BREAKDOWN COSTS. Happened to me a few years ago, had my contractor in making silage with a new self propelled (I was starting to get aroused) then in the afternoon it made a strange noise and spat its guts out. I went in the house and had a cup of tea. The contractor went to the bank and got a O/D extension to fix it! Silage made for £35/acre all in. I didn't pay the additional thousands to repair chopper. Lesson learnt. Afternoon tea no hassle, magic.
    Last edited by LALANS; 22-10-13 at 06:02 PM.

  5. #65
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Yes, I can fully inderstand your logic. Believe me, it scares me to see what some of these small time start up contractors splash out on kit. I understand that things need to be efficient and reliable but working yourself into an early grave to keep the things paying their way, if not feeling guilty you are not working them is not the way I want to be. I am so far away from wanting that millstone around my neck. Ill leave them to it. Thanks all for your interesting points. Rich

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    Senior Member b slicker's Avatar
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by LALANS View Post
    Thanks for the comment Panzer was starting to think I had gone OTT. Sometimes tough love is what's required.
    Good luck Richard. When you are STARTING TO BE TEMPTED BY SHINY NEW MACHINES JUST THINK OF BREAKDOWN COSTS. Happened to me a few years ago, had my contractor in making silage with a new self propelled (I was starting to get aroused) then in the afternoon it made a strange noise and spat its guts out. I went in the house and had a cup of tea. The contractor went to the bank and got a O/D extension to fix it! Silage made for £35/acre all in. I didn't pay the additional thousands to repair chopper. Lesson learnt. Afternoon tea no hassle, magic.
    Are you sure that the contractor didn't have normal insurance which would pay out for any damage?

    And were you relieved that he didn't claim against you for whatever got into the machine to cause extensive damage?

    And why did you go into the house for a cup of tea, when it was in your interests to help him to get going again ASAP?

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    Senior Member wellington53's Avatar
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by b slicker View Post
    Are you sure that the contractor didn't have normal insurance which would pay out for any damage?

    And were you relieved that he didn't claim against you for whatever got into the machine to cause extensive damage?

    And why did you go into the house for a cup of tea, when it was in your interests to help him to get going again ASAP?
    I think he was joking?

  8. #68
    Senior Member Phil's Avatar
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by LALANS View Post
    Thanks for the comment Panzer was starting to think I had gone OTT. Sometimes tough love is what's required.
    Good luck Richard. When you are STARTING TO BE TEMPTED BY SHINY NEW MACHINES JUST THINK OF BREAKDOWN COSTS. Happened to me a few years ago, had my contractor in making silage with a new self propelled (I was starting to get aroused) then in the afternoon it made a strange noise and spat its guts out. I went in the house and had a cup of tea. The contractor went to the bank and got a O/D extension to fix it! Silage made for £35/acre all in. I didn't pay the additional thousands to repair chopper. Lesson learnt. Afternoon tea no hassle, magic.
    Surely if it's "shiny new machines"...the breakdowns will be covered by a manufactures Warranty ?
    And you have insurance for accidental damage.

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

    Quote Originally Posted by Phil View Post
    Surely if it's "shiny new machines"...the breakdowns will be covered by a manufactures Warranty ?
    And you have insurance for accidental damage.
    Not just me thinking our advisor friend isn't all that clued up about what is happening down on the farm. The contractor I used to use with a silage box used to charge for broken blades, so if the chopper was new and came to bits it would be a warranty job. If it was a foreign object then the contractor would be within his rights to claim on his insurance, a new chopper uninsured? I don't think so.
    Maybe having sat down and done the maths (stupid) rolling wasn't considered to be a paying job.

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

    Quote Originally Posted by wastedyears View Post
    Not just me thinking our advisor friend isn't all that clued up about what is happening down on the farm. The contractor I used to use with a silage box used to charge for broken blades, so if the chopper was new and came to bits it would be a warranty job. If it was a foreign object then the contractor would be within his rights to claim on his insurance, a new chopper uninsured? I don't think so.
    Maybe having sat down and done the maths (stupid) rolling wasn't considered to be a paying job.
    Would you get finance for a new chopper without having insurance ?

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    Senior Member LALANS's Avatar
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by wastedyears View Post
    Not just me thinking our advisor friend isn't all that clued up about what is happening down on the farm. The contractor I used to use with a silage box used to charge for broken blades, so if the chopper was new and came to bits it would be a warranty job. If it was a foreign object then the contractor would be within his rights to claim on his insurance, a new chopper uninsured? I don't think so.
    Maybe having sat down and done the maths (stupid) rolling wasn't considered to be a paying job.
    Do you think warranty, insurance and downtime comes free? Or do fairies live at the bottom of your wood?
    I can see why the education system is being accused of failure.

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

    Quote Originally Posted by LALANS View Post
    Do you think warranty, insurance and downtime comes free? Or do fairies live at the bottom of your wood?
    I can see why the education system is being accused of failure.

  13. #73
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by banjo View Post
    I have plenty of new tack and good used machinery that I've acquired without any hp at all, just sensibly using the overdraught to my advantage.
    Most manufactures now offer 0% interest schemes in a bid to keep their customers buying/investing. 2 + 22 months & 3 + 33 months interest free are widely available on a hell of a lot of stuff.
    100% of the payments you make in the year are fully Tax deductible expenses !

    Write out a cheque for one of these new bits of kit...and not only are you paying interest on your overdraught, The tax man then only allows you 40% against tax !

    Each to their own I guess.

    And when you start off your farming business in Debt, as I & a number of other farmers I know had to, you become use to running things with borrowings ! Mother sold the cows & quota etc to build herself a bungallow and then had everything else valued...so I started my farming business in debt to my mother to the turn of almost £50,000.00 ! O.K - so no one held a gun to my head & forced me to do it. But looking at the situation now with my wife & 4 young children growing up where I was born & having a pretty good environment to grow up in.....I certainly would not change a thing !!
    Some may accuse me of lacking business sense & not having any motivation, but I will always argue that there really is so much more to life than making huge profits !

  14. #74
    Senior Member Phil's Avatar
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by LALANS View Post
    Do you think warranty, insurance and downtime comes free? Or do fairies live at the bottom of your wood?
    I can see why the education system is being accused of failure.
    Warranty - already built in to the price for the first twelve months (sometimes longer) & if you want an extended manufactures warranty they generally prove pretty good value for money !

    Insurance - Well that is compulsory !

    Downtime - All part & parcel of the job !

    What was it you were saying about Education ?

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    Senior Member LALANS's Avatar
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by Phil View Post
    Warranty - already built in to the price for the first twelve months (sometimes longer) & if you want an extended manufactures warranty they generally prove pretty good value for money !

    Insurance - Well that is compulsory !

    Downtime - All part & parcel of the job !

    What was it you were saying about Education ?
    FYI
    Eh naw. One of the biggest cons out is extended warranty. The MD of a well known tractor manufacturer told me that such extended warranty schemes were good money makers. The bog standard extended warranty covers sfa, read the small print.
    Taking tractors as an example this same man said stats has shown that the vast majority of faults occur within the first 3 months (covered anyway) and after 36-42 months (by which time professional users have changed the tractor). Warranty for a unit over 36 months ~ 7-10,000 hrs is horrendous.
    THERE AIN'T NO SUCH THING AS A FREE LUNCH

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    Senior Member wellington53's Avatar
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by Phil View Post
    Some may accuse me of lacking business sense & not having any motivation, but I will always argue that there really is so much more to life than making huge profits !
    An that is so damn true.

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

    Quote Originally Posted by Phil View Post
    Most manufactures now offer 0% interest schemes in a bid to keep their customers buying/investing. 2 + 22 months & 3 + 33 months interest free are widely available on a hell of a lot of stuff.
    100% of the payments you make in the year are fully Tax deductible expenses !

    Write out a cheque for one of these new bits of kit...and not only are you paying interest on your overdraught, The tax man then only allows you 40% against tax !

    Each to their own I guess.

    And when you start off your farming business in Debt, as I & a number of other farmers I know had to, you become use to running things with borrowings ! Mother sold the cows & quota etc to build herself a bungallow and then had everything else valued...so I started my farming business in debt to my mother to the turn of almost £50,000.00 ! O.K - so no one held a gun to my head & forced me to do it. But looking at the situation now with my wife & 4 young children growing up where I was born & having a pretty good environment to grow up in.....I certainly would not change a thing !!
    Some may accuse me of lacking business sense & not having any motivation, but I will always argue that there really is so much more to life than making huge profits !
    You aren't the only one who's had it hard, I took over from my father to stop the bank selling the farm and *uck all to pay any bills with. the figure you quoted above would of been nicer than the one I had I assure you.
    one thing I learnt with banks is never trust em, borrowings can be called in overnight and you have no choice in the matter.
    my overdraught is used for 6 months and paid back every year without fail. the borrowing costs me hardly anything during that time and while you don't agree with paying down, I then own that machine at that moment and I would rather have control, not the hp company or the bank!

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

    Goes back to another thread. I wish my parents had not sold up and left me with a £100k loan and 300 or so acres instead of no debt and 50 acres now. They did what they thought was best. Maybe it was. Debt is slavery. But another 250 acres would be nice........

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

    Quote Originally Posted by Richaroundwash View Post
    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.
    If you are taking over the farm from your family, why not borrow from them ? They will earn virtually zero on their money yet you could at least pay them the same rate as you will pay to the bank 6% ?and they can still hold the farm as security.

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    Senior Member Phil's Avatar
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by banjo View Post
    You aren't the only one who's had it hard, I took over from my father to stop the bank selling the farm and *uck all to pay any bills with. the figure you quoted above would of been nicer than the one I had I assure you.
    one thing I learnt with banks is never trust em, borrowings can be called in overnight and you have no choice in the matter.
    my overdraught is used for 6 months and paid back every year without fail. the borrowing costs me hardly anything during that time and while you don't agree with paying down, I then own that machine at that moment and I would rather have control, not the hp company or the bank!
    I know…that is why I said –


    Quote Originally Posted by Phil View Post
    And when you start off your farming business in Debt, as I & a number of other farmers I know had to, you become use to running things with borrowings ! Mother sold the cows & quota etc to build herself a bungallow and then had everything else valued...so I started my farming business in debt to my mother to the turn of almost £50,000.00 ! O.K - so no one held a gun to my head & forced me to do it. But looking at the situation now with my wife & 4 young children growing up where I was born & having a pretty good environment to grow up in.....I certainly would not change a thing !!
    Some may accuse me of lacking business sense & not having any motivation, but I will always argue that there really is so much more to life than making huge profits !
    O.K… so you have managed to pay off your original debt & now run things with an overdraught with no HP etc.
    Well good on you !
    Just out of interest…what sort of farm do you have & what size is it ?

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

    Quote Originally Posted by Harry E View Post
    If you are taking over the farm from your family, why not borrow from them ? They will earn virtually zero on their money yet you could at least pay them the same rate as you will pay to the bank 6% ?and they can still hold the farm as security.
    6% ???

    That's 5.25% over the current base rate.

    Who the hell do you bank with..."Grabit-n-run" ??

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    Senior Member b slicker's Avatar
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    Re: Sensible Financing For young person wishing to take over farming family farm

    There's no fun in any business unless you're under a certain amount of financial pressure.
    And I'd rather be paying a hefty chunk of interest rather than a big rent. At least you can attempt to farm your way out of a big
    borrowing, but you can't farm your way out of a big rent.

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

    Quote Originally Posted by b slicker View Post
    There's no fun in any business unless you're under a certain amount of financial pressure.
    And I'd rather be paying a hefty chunk of interest rather than a big rent. At least you can attempt to farm your way out of a big
    borrowing, but you can't farm your way out of a big rent.
    Amen.

  24. #84
    Senior Member Phil's Avatar
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    Re: Sensible Financing For young person wishing to take over farming family farm

    Quote Originally Posted by b slicker View Post
    There's no fun in any business unless you're under a certain amount of financial pressure.
    And I'd rather be paying a hefty chunk of interest rather than a big rent. At least you can attempt to farm your way out of a big
    borrowing, but you can't farm your way out of a big rent.
    Problem with that is that some banks, and mortgage companies, were lending farmers far too much...based on the security of the land/holding.
    They very rarely checked out if the farmer was any good...or even if he knew his farm or knew what he was doing !

    In the Tenanted sector Banks etc will not lend unless everything stacks up !

    And if you find yourself in the position of "having to farm your way out of a big rent"...then you should obviously not have agreed to pay such a big rent in the first place ?

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

    Quote Originally Posted by Phil View Post
    6% ???

    That's 5.25% over the current base rate.

    Who the hell do you bank with..."Grabit-n-run" ??
    Thanks Phil. What is the going rate then to borrow from the Bank ?

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

    Quote Originally Posted by Harry E View Post
    Thanks Phil. What is the going rate then to borrow from the Bank ?
    About what you quoted, for an unsecured new overdraft for a tenant farmer. Can be higher if you have no record to speak of, or a poor one of paying it off.

    Lloyds standard OD rates are on their website http://www.lloydsbankbusiness.com/ra...ding_rates.asp
    HSBC aren't a million miles under that either, not sure about the others.

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

    around half the size of the op's and it's mainly a sheep farm.
    the difference between me and you is, I recognise everyone does their financing differently and I'm sure it is done excellently and I respect them all for it.
    but I know there is another way to do it without risking everything and I would advise everyone contemplating big machinery borrowings on a mid range farm to think very hard indeed before they sign on the dotted line.
    you seem to think everyone who doesn't do it your way is a numpty and knows sod all about anything!
    some farms do things one way, others another, but there are a few ways to skin a cat, me thinks.

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

    Quote Originally Posted by Harry E View Post
    Thanks Phil. What is the going rate then to borrow from the Bank ?
    According to the bank statement I have in front of me - "Overdraft rate Arranged 3.75%"

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

    Quote Originally Posted by banjo View Post
    around half the size of the op's and it's mainly a sheep farm.
    the difference between me and you is, I recognise everyone does their financing differently and I'm sure it is done excellently and I respect them all for it.
    but I know there is another way to do it without risking everything and I would advise everyone contemplating big machinery borrowings on a mid range farm to think very hard indeed before they sign on the dotted line.
    you seem to think everyone who doesn't do it your way is a numpty and knows sod all about anything!
    some farms do things one way, others another, but there are a few ways to skin a cat, me thinks.
    I have never said or implied anything of the sort.......it's not my fault people don't know when they are having their leg lifted !

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

    Quote Originally Posted by Phil View Post
    According to the bank statement I have in front of me - "Overdraft rate Arranged 3.75%"

    That will be probably over the bank's own base rate which may or may not be the same as the BOE base rate.

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