Skylark Land & Homes LTD
No-win no-fee planning for residential plots
One challenge facing any farm or rural business owner – whether a start-up or a growing business – is finding the finance to help turn your dreams into reality.
There is a range of available finance options including loans, mortgages, grants and invoice factoring and new options such as crowdfunding and peer-to-peer lending. These types of funding may be appropriate for different purposes and, of course, may differ in cost. With this number of options, where does a business start?
With no or little historical financial activity, over the last decade, start-ups have found it difficult to find traditional bank loan finance due to the high risk of failure for new businesses. However, many new rural businesses continue to incubate and fledge, often from diversified farm businesses, and there will inevitably be both successes and failures.
For both start-ups and expanding businesses, funding may be a little more accessible now with new, alternative lenders entering the commercial lending market. However, the rural sector has not attracted the same level of interest, generally because many don’t understand how farms and rural businesses work. Nonetheless, there are options out there if you know where to look.
Planning must be your first step
Regardless of the funding source or type, preparation is the first and most important step. A strong, realistic and well-presented business plan is crucial in helping to secure finance or grant funding. You often only get one chance to make a good impression, so you must make it count by presenting a robust plan. Get it right and you earn the trust of lenders or grant donors, get it wrong and you may not get your business off the ground.
See also: How to write a business plan
You’ll need to include your plans and goals coupled with substantiated financial and cash flow projections. Detail the business idea, your experience, how it is sufficiently different to your competitors and how you will market the business. You’ll need to be clear on the finance you need, your ability to repay any loan, your break-even point and what your personal drawings will be.
There’s a lot of information to include, and a lot to lose by not preparing well. You may find you need professional help and could involve your accountant, consultant or another financial expert. The process for some types of funding can take a long time, so make sure you plan well in advance.
Conventional types of non-bank funding
With a robust business plan, you’ll now be ready to approach lenders or grant donors. Before turning to banks, explore some of the following routes.
See also: If the bank says no where do you go?
The Government’s Business Finance Support Finder is a useful tool for finding relevant funding. The funding pots can be relatively small, the applications are often complicated, and success is not guaranteed, but you must explore them as any grant funds are helpful. For example, the RDPE Growth Programme provides funding for projects in England which create jobs and growth in the rural economy.
Other funding is available for Wales, Scotland and Northern Ireland. LEADER funding is available to businesses through their Local Action Group. New entrant grant schemes operate in Scotland and a new Young Entrant Support Scheme (YESS) has recently been announced in Wales.
Conventional types of bank finance
After exploring grant funding and your or your family’s ability to fund new projects or expansion, look at high street banks or other lender options. Many businesses will turn to their existing bank, but it’s important to look at the whole of the market and check offers from other sources to make sure you are getting the best deal and terms.
New or alternative types of funding
Many alternative lenders are now entering the lending market, with some, but not all operating in the rural marketplace. Alternative lending can play its part in helping businesses start, grow or adapt as they will consider propositions outside the normal high street bank criteria.
Funds will be available for the right businesses with the right propositions, but it’s vital you plan any start-up or investment project properly before approaching lenders and seek advice from your accountant or financial consultant before embarking on any borrowing.
It’s important you know the total cost of repaying the debt and that any borrowing is affordable by a decent margin. Stress test the investment against falling prices and raising interest rates to make sure you can still afford repayments, and still make more money than you invested if market conditions change.
Finally, look at all the available options and don’t take the first lending offer you get. You can get better deals by shopping around and negotiating margins and terms.