What happens if you’re an older farmer with a farm and land but without family to take over, or the liquid means to transition into retirement?
While we continue to be contacted by farmers interested in securing funding for their diversification projects, we’re also hearing from older farmers who are past retirement age but still farming on their own farm. Many don’t want to come out of the farm quite yet, but the reality of reductions in the levels of Basic Payment Scheme (BPS) is starting to take effect. Cuts in the levels will impact directly on the bottom line, especially on a holding not actively generating alternative streams of income. The possibility of linking retirement with a draw-down of the remaining six years of BPS in a one-off lump sum is still not confirmed and any tax implications remain unknown but it appears to be holding back many families from deciding their future direction.
A case study example is a farm that has not been generating good profit, the overdraft has become uncomfortable and there isn’t the cash to buy somewhere else to live if they do come out of the farm. A cottage comes up for sale in the village and having lived and farmed locally their whole life they don’t want to miss the opportunity of securing a local home for their retirement. The problem is they don’t have any cash, though they are sitting on an asset of £2.5m consisting of unencumbered farmhouse and land.
With this level of security, a FOLK2FOLK loan could refinance their bank overdraft, alleviating that pressure, as well as finance the purchase of the village property as a buy to let with the rent used to service the loan. Within our loan time-frame of maximum five years, they could stay where they are on the farm and wait to see what happens with the Basic Payment Scheme and whether a windfall materialises. When they decide to sell their farm, the sale income could pay off the loan and they could relocate into the village property. With the funds left over they could go on to become a FOLK2FOLK investor which would provide them with a monthly income of typically 6.5% p.a. to supplement their retirement.
FOLK2FOLK does not offer financial planning advice, but if you are interested to know more about borrowing or investing via FOLK2FOLK, please Talk To Us.
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