This post is one of a series featured in Farmers Guardian while I took part in the Fresh Start Dairy Academy, a farm business training and mentoring course for new entrants into dairy farming.
After the excellent first session, it didn’t take long for the next Dairy Academy evening to roll around. This time, our subject was financing and benchmarking farming ventures.
The session started with an overview of different types of finance: bank loans, overdrafts, mortgages, hire purchase, equity investment, and even things like credit cards and credit terms from trade suppliers.
We went on to cover which options are best suited for which purposes, the differences in loan period, interest rates and security requirements. Our speaker explained loan-to-value percentages and agricultural charges on farm assets, and warned us against excessive overdrafts to fund capital projects or falling prey to the cut-throat sub-prime lenders who advertise in the farming press.
As a practical illustration, we heard from a local Cheshire farmer about how he had financed and built a dairy business on his family farm.
He shared some very colourful advice and frank opinions with us, stressed the importance of cutting waste and unnecessary costs, and advised us to invest as much as possible in stock and forage (the core of the business) rather than locking money up in expensive toys to impress the neighbours.
Finally, a speaker from DairyCo talked to us about benchmarking, which is becoming vital as margins are squeezed and we have to become ever more efficient and resilient. He told us about the free Milkbench service, and the farmer who spoke previously shared his farm’s report.
I was very impressed. It was obvious how useful he found it for spotting strengths and weaknesses compared to other similar farms. DairyCo even offer to do most of the leg work collecting the data from the farm records and management accounts — what more could you ask for?