Farmers are set to be some of the hardest hit workers as Britain negotiates its way out of the EU. But local lending through a peer-to-peer platform can provide a valuable form of finance so that farmers can access funds to grow, diversify or refinance amid the uncertainty of Brexit.
A recent study of 172 farms by the Prince’s Farm Resilience Programme, found just 16 per cent made a profit from their farming activities over the period assessed. Recent analysis found that instead many farms are now relying on alternative income streams to turn a profit, such as tourism, renewable energy and selling their products directly to consumers.[i]
But diversification and moving into alternative areas of business requires capital. And, with the average farm in the study making a loss of more than £20,000 from its farming activities, it may be capital that farmers require to invest in their business to prevent a loss.
Peer-to-peer finance could be a lifeline to the UK farming industry. It allows landowners to raise much-needed funds to help diversify their business. Meanwhile, local lenders can enjoy the produce and services their money has contributed towards creating.
The farming industry has already had to tackle a number of significant challenges in recent years. Supermarket giants have squeezed profit margins and demanded ever-increasing output levels.
It is estimated that the number of dairy farmers has more than halved over the past decade, unable to keep up with cost cuts. A survey by the National Farmers’ Union[ii] earlier this year found confidence among farmers on the outlook over the next three years had plunged, with many concerned about rising costs and an increase in trade tariffs which could eat into profits. A recent report by the Agriculture and Horticulture Development Board (AHDB) estimated that the average farm could see its income halved after Brexit.[iii]
EU subsidies have provided a much-needed boon to many farms, providing a £2.5 billion funding lifeline[iv]. Leaving the EU will likely leave a major gap in many farms’ balance sheets and local lending could provide the plug many farmers may require.
Many small businesses are turning away from the high street lenders when they are looking for funding or finding banks unwilling to lend to them. At the same time, many investors are looking for a more social and sustainable way to earn interest on their cash. It is estimated that in 2015 some 12 per cent of lending to small and medium sized businesses came through peer-to-peer platforms and the proportion is only growing.[v][LD1]
The appeal is easy to see: investing money in local businesses means not only do lenders have the chance to earn an inflation beating rate of interest but they can also see exactly how their cash is being used on their local communities.
Folk2Folk champions local lending because we believe in creating financially and socially sustainable communities by matching local businesses with local lenders. With headquarters in Cornwall and hubs across the UK in rural communities, we’re well aware of the importance and impact farmers have on their local communities, and all of the challenges and opportunities they face during the Brexit transition.
To learn more about how finance solutions from FOLK2FOLK could help with your business and farm, be sure to visit www.folk2folk.com/loans