Agricultural Refinance to Fund Livestock Purchase, Aberdeenshire

Finance raised

£80,000

Assets refinanced

Combine harvester, Manitou telehandler, attachments

Sector

Agriculture (mixed arable and cattle)

Location

Aberdeenshire

Purpose

Livestock purchase at auction

Timescale

Funds released within the week

The situation

The client operated a mixed arable and cattle farm near Aberdeen that had been in the family for multiple generations. Since the passing of his father he had been running the farm alone, and like many farmers he had a range of machinery at his disposal but not a great deal of immediately available cash.

He had become aware of cattle due to be entered into an auction in Stirling that he was keen to purchase. The opportunity was time-critical. He approached his bank to request an overdraft increase to fund the purchase, but quickly realised that the process was likely to be long and drawn out, and that even if successful the funds would almost certainly not be available in time for the auction date.

Martin had previously arranged vehicle finance for the same customer, so when the farmer asked whether there was any way to raise funds quickly, Martin was already familiar with the business and the person behind it.

Understanding the assets

Martin explained that an alternative route to raising the £80,000 could be through refinancing existing farm equipment, and asked what assets the farm held. As is common with agricultural customers, the main tractors had been financed directly through a franchised dealer on a subsidised manufacturer scheme, with a single annual payment and an interest rate below what most banks pay for their own money. In that situation, refinancing those tractors would have made no financial sense, and Martin advised leaving them exactly where they were.

The next group of assets told a different story. The farm owned a 16-year-old combine harvester, a five-year-old Manitou telehandler, and a number of smaller attachments ranging from two to six years old. Martin visited the farm, photographed the assets and gained a full understanding of where each had been purchased, how it had been used, and crucially, when the customer expected to replace it.

The offer

Martin discussed the assets and the full customer story with the relevant lenders on the panel. Within the week he came back to the customer with an offer for the full £80,000 requested. The offer was immediately accepted and the paperwork was completed with the client.

A practical problem, solved through experience

With any refinance transaction, the client must be able to provide proof of ownership of the assets to the lender. This is often where delays occur, particularly with older equipment where original invoices may have been mislaid or simply never retained.

In this case, proof of title was straightforward for most of the assets. One remained outstanding. Rather than delay the transaction or reduce the finance amount, Martin contacted the client's chartered accountant. The accountant confirmed in writing that the assets were owned by the client and provided a letter to that effect for the lender.

Knowing which lenders will accept this, is the kind of experience that keeps a transaction moving rather than stalling at the final hurdle.

The outcome

The funds were released to the client in advance of the auction. He was able to purchase the additional cattle he wanted. The farm's existing machinery remained in full working use throughout, and the finance was structured to fit around the farming operation rather than disrupt it.

The bank had offered a process that might have worked, eventually. Refinance delivered the answer within the week.

About the author

Martin Mackenzie

Director, Mackenzie Commercial Finance. Asset finance specialist with 20+ years in commercial banking and asset finance, including experience with Bank of Scotland and Close Brothers Asset Finance. Based in Inverness, working with businesses across Scotland.