construction loan for a run-ofriver hydropower project and its subsequent refinance with us to an operating business loan, that worked with the borrower as they went through the usual commissioning headaches, followed by several dry summers and delayed Ofgem payments. This was secured against a normal family farm, as we could tranche payments as the project proceeded and we understood the issues they faced. At the opposite end of the spectrum, we funded a smaller loan for the installation of ground source heat pumps by one of the largest poultry businesses in the country, but whose High Street bank was unable to act quickly enough to enable them to secure a government Renewable Heat Incentive contract. We see the usual range of loans tied to inheritance, family farm structures and, sadly, divorce. Currently, we’re funding both sides in a divorce, to enable both borrowers to grow their respective farms, but also help them escape a predatory lender. Over the last few years, we have had a steady inflow of Class-Q planning related development loans and an increase in farmdiversification lending, which ranges from the relatively common addition of glamping pods, through the purchase of the village pub, to vineyards, to nature reserves and even the conversion of a Norman Keep to an educational facility. Our expertise has included funding Agricultural Holding Act tenants with a right to buy, as well as dealing with the more common agriculturally tied properties. In addition to a growth in farmdiversification, two other trends have stood out to us. The first being increased referrals from High Street bank managers, where they have good quality borrowers that they can’t get internal approval for, typically because the borrowers are either changing the focus of the farm, such as converting from beef to dairy, or the borrower has had a challenging couple of years and head office is wanting to dump the loan into the bank’s “business support unit”. In all instances, these are goodquality borrowers, who just require support and patience, before they can move back to the High Street. The other more concerning trend is various predatory lending practices from ‘FinTech’ or ‘peer-to-peer’ type lenders, that raised a tranche of short-term money that they rushed out the door without understanding the sector and now are aggressively pursuing repayment, without any recognition of the farming cycle. Looking forward, our farming borrowers have withstood the rising interest rates remarkably well and generally have not over-expanded, even as food prices have shot up. The recent fall in the natural gas price translates into lower fertiliser costs, which historically correlates closely with food prices. Land prices are holding up well and where we’ve had sight of exit valuations, these have almost all been ahead of the Red Book valuation, helped by a relative scarcity of land being sold. With the recently announced new line of £300 million, we’ve seen strong demand from good-quality applicants for our main-term lending and high-quality bridge products. Later this year we expect to announce two new products aimed at helping farmers solve some of the sector’s big challenges: an ageing workforce and a lowercost solution to inflexible High Street lending. Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s 53
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