Farm bridging finance – warning!
We have been receiving a number of enquiries about farm bridging finance. Some of these have come from farmers who are sitting tenants, wanting to buy their farm from a landlord. For example, the Duchy of Lancaster has been selling off a lot of land in 2011. Often there is a huge gain to be had from a sitting tenant buying their property, because they can do so at a substantial discount.
However, the mission is fraught with danger unless you deal with a firm that handles things ethically. What we find is that often our potential customers have made similar enquiries of one of our competitors, who says it is the market leader in the provision of ‘opportunity’ finance and makes out that, because we are brokers, their service is better when our evidence shows just how much money we saved one of our customers, Mr and Mrs R of Ceredigion who had been to our competitor to begin with and did not feel comfortable. What people tell us is that they are told, by this competitor, that they should take a bridging loan for six months after which they will have found replacement long-term finance for them. When we examine some of these cases, it is patently obvious that the farm often cannot sustain the loan in the longer-term and that the customer should never be told that such finance is available. Whislt it is likely that the ultimate paperwork, from the competitor, will say that finance is not guaranteed (doubtless to avoid liability), often this will come when the customer has been hooked. After all, if long-term finance is what is required, why have a bridging loan to begin with? Just because the perception is one that a bridging loan is faster does not justify this and if our competitor is as good as it says it is, it should be able to demonstrate long-term availability on day one, or at least quickly thereafter, and in any event before customers are committed.
We know that we lose business on the basis of the fundamental need to tell the truth by not indulging in misrepresentation. Often, a bridging loan is the right solution on the basis that the farm can be bought at a discount and then sold off in part or full, which realises the potential gain to the customer, but by knowing the truth, our customers can get on with marketing their property rather than hanging around waiting for long-term finance that is never going to materialise. We would never tell a customer that replacement farm finance is available when we know or ought to know that it is not. We are aware that this is sometimes not what our customers want to hear. But if the truth hurts then the pain will be far less than it will be than if our customers get to the end of the bridging loan and have no replacement finance. We know, for we are sometimes asked to tidy the mess up, often without success because the only option is a full or part sale that should have been evident and obvious right from the start. As a result, these customers suffer the stress and the hassle of dealing with our competitor that is only interested in its own coffers. Often customers have not started any marketing, under some false impression that replacement finance was being arranged for them. Now we wonder how that might have formed that impression?
Please have a look at our case study in relation to a Mr and Mrs R of Ceredigion at www.farmandcountryfinance.co.uk/case_studies.html#22 where our competitor had been initially involved. From this you will see that the customer was told precisely what their position was by us, could make sale arrangements accordingly and successfully sold and realised their profit. Not only that, we saved them a bucket load of cash and arranged the loan over a longer period which would have given them greater flexibility had they not sold earlier. The result was happiness all ways round which is just the way it should be.
So, the message is simply – beware of Greeks bearing gifts. The regulators don’t seem too keen to get involved in helping business people who ought to know better – and indeed they ought to if they are told the truth. That is what you’ll get from Farm and Country Finance.