Seeking conventional bank support can be frustrating with tighter restrictions and lending criteria.  Any change to your enterprise mix or diversification project will most likely require additional funding and if your business has a poor track record or insufficient profitability shown in your business accounts, the chances are that your current lender may turn your proposal down.

In certain circumstances banks/lenders are also showing a reluctance to provide “projection led” borrowing requests.  An alternative lending source that may be worth consideration is “Peer to Peer Lending”

Peer to Peer Lending brings individual borrowers and lenders together bypassing traditional banks.  The concept is that each partner receives an improved rate, with lenders receiving more interest and borrowers repayments being less than a bank loan.

Key Features:
• Typical term is 3 months to 5 years
• Maximum loan to value rates will apply e.g. 60%
• The valuation is often on a forced sale value and this may bring the loan to value down (LVA) to 40-45%
• Valuation is against land and property NOT livestock or machinery
• Service fees are applied
• Interest rates typically vary between 5-8%

This route may be considered as a temporary “bridging” situation or when your conventional lender will not support your new project.  By establishing the viability of the project you may then be able to revert back to your primary lender.

As with any proposal, to ensure the successful outcome your business plan must be well thought out and fully costed, be based on achievable targets, with sensitivity analysis carried out on the key considerations of the budget.

With all loans you must be clear of all rules, costs involved and be clear of your end strategy.

For more information please contact: Kevin at kevinedwards@fcgagric.com or your local FCG office.