Input costs across the agricultural sector, particularly fertiliser and fuel, are expected to increase significantly over the coming year, placing additional pressure on farm businesses and their working capital.
While this will impact margins, the more immediate challenge for many arable and dairy businesses will be cashflow and working capital.
In recent years, some businesses will not have generated sufficient surplus to absorb these increases. As a result, additional borrowing may be needed to fund seasonal operations.
However, securing this funding is becoming more challenging. Lenders are taking a more cautious approach, particularly where businesses have experienced recent trading losses or where existing facilities are already stretched.
Preparing for lender discussions and cashflow planning
In this environment, preparation is important.
Lenders will expect to see:
- A realistic budget
- A clear cashflow forecast
- A good understanding of previous trading performance
Being able to explain how the business has performed and how it is expected to perform will help build confidence with lenders.
For many farm businesses, taking a more structured approach to financial planning and cashflow management will be necessary over the coming year.
The value of independent input
An independent view on budgets and past performance can also be helpful.
This can highlight risks, test assumptions and strengthen the overall position when speaking to lenders.
Our perspective
Rising input costs are not just a margin issue. They are creating additional pressure on cashflow and funding for farm businesses.
The key is understanding your position early and being properly prepared when speaking to lenders. Clear forecasts and a strong understanding of past performance can make a real difference to those discussions.
Rising input costs are creating additional pressure on cashflow and funding for rural businesses.
Taking time to review your position now can make a significant difference when it comes to securing funding.
Newton works with rural businesses to review financial performance, prepare forecasts and support discussions with lenders.
If you are reviewing your position or planning ahead for the next season, please contact our rural team to discuss how we can support your business.