Farm Loan

nobeef

I need a long term (min 10 years) farm loan. What rates and security should I expect? I don't want to be telling every bank all my private details. How do I find out who is lending theses days to dairy farmers? What approach should I take here? Thanks

freedominacup

nobeef wrote: »

I need a long term (min 10 years) farm loan. What rates and security should I expect? I don't want to be telling every bank all my private details. How do I find out who is lending theses days to dairy farmers? What approach should I take here? Thanks

You will need a minimum of three years accounts and a cash flow projection for the next five. You are going to have to give them a lot of details. They will look for the max security they can get. BOI are talking a good fight.

Deepsouthwest

freedominacup wrote: »

You will need a minimum of three years accounts and a cash flow projection for the next five. You are going to have to give them a lot of details. They will look for the max security they can get. BOI are talking a good fight.

Got a loan over 15 yrs with AIB last wk at 5%, bank of Ireland could only do 6.74%. AIB have security from a previous loan. Bank of Ireland can do a loan up to 65k with no security

Greengrass1

Deepsouthwest wrote: »

Got a loan over 15 yrs with AIB last wk at 5%, bank of Ireland could only do 6.74%. AIB have security from a previous loan. Bank of Ireland can do a loan up to 65k with no security

Would you think 5% is a bit high for a 15 yr loan.
I know its the timed were in and banks know dairy farmers are wanting loans

Deepsouthwest

Greengrass1 wrote: »

Would you think 5% is a bit high for a 15 yr loan.
I know its the timed were in and banks know dairy farmers are wanting loans

Yes, but it was 5% vs 6.74%, so I hadn't much choice. My accountant said get it over as long as possible, and then just pay it off in 4 or 5 yrs.

Greengrass1

Deepsouthwest wrote: »

Yes, but it was 5% vs 6.74%, so I hadn't much choice. My accountant said get it over as long as possible, and then just pay it off in 4 or 5 yrs.

Will you not get penalised if you paybit off quicker?
That is a very good option though. If ye get caught some month for money your ahead anyway

Deepsouthwest

Greengrass1 wrote: »

Will you not get penalised if you paybit off quicker?
That is a very good option though. If ye get caught some month for money your ahead anyway

No penalties for paying off quickly, it was one the first questions asked! And the amount being paid quarterly is set, so u can budget knowing it won't be going up or down

Brown Podzol

Deepsouthwest wrote: »

Got a loan over 15 yrs with AIB last wk at 5%, bank of Ireland could only do 6.74%. AIB have security from a previous loan. Bank of Ireland can do a loan up to 65k with no security

5% fixed or variable? What margin on to cost of funds?

nobeef

Deepsouthwest wrote: »

Got a loan over 15 yrs with AIB last wk at 5%, bank of Ireland could only do 6.74%. AIB have security from a previous loan. Bank of Ireland can do a loan up to 65k with no security

What kind of security are they looking for? I presume a non-secured loan has a higher rate than a secures one, or am I correct?

sheebadog

Deepsouthwest wrote: »

No penalties for paying off quickly, it was one the first questions asked! And the amount being paid quarterly is set, so u can budget knowing it won't be going up or down

Might harm your credit rating to pay off a loan before time.

nobeef

If you went into 4 or 5 banks for a loan then did you have to supply all details (past accounts) to all of them? Here is me being all secretive again...

Farmer Pudsey

nobeef wrote: »

What kind of security are they looking for? I presume a non-secured loan has a higher rate than a secures one, or am I correct?

If you went into 4 or 5 banks for a loan then did you have to supply all details (past accounts) to all of them?

Yes you will have to give accounts to all banks. Get a soft copy of your accounts so you can just e-mail it or put it on a disk or usb key that they just downloads and return usb key.

Usuall they look for about 1.5-2 times security. Yes non secure loan will be 2-4% higher. Very hard to beat 5% at present onlt thinkg try to get them to pick up there own legal costs. It a case of bargin as best as possible I notice taht banks are more inclined to lend to there own customers and give better rates to these.

exercise is the antidote

What % of the loan do they ask for? I'm sure you can't rock up to the bank looking for a 10year loan with a few penny's in the account?

nobeef

freedominacup wrote: »

They will look for the max security they can get. BOI are talking a good fight.

What do you mean here?

freedominacup

nobeef wrote: »

What do you mean here?

They're putting it out there that they have money to lend and are mad to do business but it's often a difficult process to get this cash they say they want to loan out.

Farmer Pudsey

Banks will also want over securitation . They will take the who farm as securit if given to them. For a 100K loan 20 acre of good land should be enough security you can set it in a seperate folio, or give an out farm etc. The reson for this is that if you want to borrow again down the line while this lons is being repaid you can use other assets as security.

However you have to be realistic in that an out farm of 15 acres with only a right of way access may not be demed adequate security for a 100K even though you paid 120K for it 6 years ago.

Pacoa

What margin on to cost of funds?

Would banks really give out that sort of info?

Sam Kade

Brown Podzol wrote: »

5% fixed or variable? What margin on to cost of funds?

Variable I would imagine.

sheebadog

Sam Kade wrote: »

Variable I would imagine.

I would be fixing any long term finance. Interest rates long term have only one way to go.

Farmer Pudsey

sheebadog wrote: »

I would be fixing any long term finance. Interest rates long term have only one way to go.

Hard to know banks are charging 5% this is because they are losing money on Trackers as Interest rates rise trackers will become profitable again (or less loss making ) so banks will have less pressure to increase varible loans. A lot would depend on the rates you be charged. If I got 5 years for 5% yes I be thinking of taking it but if it was 6-7% I be gambling. Remember you cannot pay off a fixed rate early

sheebadog

Farmer Pudsey wrote: »

Hard to know banks are charging 5% this is because they are losing money on Trackers as Interest rates rise trackers will become profitable again (or less loss making ) so banks will have less pressure to increase varible loans. A lot would depend on the rates you be charged. If I got 5 years for 5% yes I be thinking of taking it but if it was 6-7% I be gambling. Remember you cannot pay off a fixed rate early

Why would you want to pay off early?
I've long term finance at much less than 5% , when you factor in inflation this is free money.
Manage risk. I'm hoarse from shouting this. Too many forget when money was circa15%.
Feck the banks. Stop genuflecting to them, but then Irish Banks got ye all by the goolies!
Iceland gave good example but I suppose it's Irish to tug the forelock.
Water, electricity etc are also services you know!

Farmer Pudsey

sheebadog wrote: »

Why would you want to pay off early?
I've long term finance at much less than 5% , when you factor in inflation this is free money.
Manage risk. I'm hoarse from shouting this. Too many forget when money was circa15%.
Feck the banks. Stop genuflecting to them, but then Irish Banks got ye all by the goolies!
Iceland gave good example but I suppose it's Irish to tug the forelock.
Water, electricity etc are also services you know!

I have money at way less than 5% it fixed over euribor and the bank is only getting the repayments. However money at 5+% is expensive where we are in Ireland at present. If bank competition comes in again you could shave 1-2% off loan rates by being able to move(ie pay off early)

sheebadog

Farmer Pudsey wrote: »

I have money at way less than 5% it fixed over euribor and the bank is only getting the repayments. However money at 5+% is expensive where we are in Ireland at present. If bank competition comes in again you could shave 1-2% off loan rates by being able to move(ie pay off early)

I love your optimism Pudsey.

dungfly

What factors should reduce the interest rates? Where can I haggle?

Farmer Pudsey

sheebadog wrote: »

I love your optimism Pudsey.

My glass is always half full.

sheebadog

Farmer Pudsey wrote: »

My glass is always half full.

Reality is.........Irish banks are FUBAR for our lifetime.

Beg from a beggar man and you'll never get rich.

st1979

sheebadog wrote: »

I would be fixing any long term finance. Interest rates long term have only one way to go.

If i was in france or anywhere in europe that could borrow at a sensible margin over ECB than i would agree. But no competition now and banks need to get profitable again. Few years ago you could do deals at 1-2% above ecb now it works out at around 5% above ECB. So in time that margin may reduce if competition comes. So i would not fix in ireland today as it probably cost around 6-7%

nobeef

Regards security and risk reduction. Has anyone created more portfolio numbers so that you are not risking too much of the farm. What is involved in creating more folio numbers? I presume its a job for a solicitor, how much and should I create multiple folio numbers at the same time in case they may be used in the future?

I presume better security means a better rate?

Farmer Pudsey

nobeef wrote: »

Regards security and risk reduction. Has anyone created more portfolio numbers so that you are not risking too much of the farm. What is involved in creating more folio numbers? I presume its a job for a solicitor, how much and should I create multiple folio numbers at the same time in case they may be used in the future?

I presume better security means a better rate?

No once they have adequate security no matter how much extra they will not lower the interest rate. generally you will have to give a personel gaurantee as well so if markets disimprove they will still hunt you. A lot depends on if you think you will need security for a loan in 2-3 or 5 years time. It depends on value and size of farm. It is not that hard a job you can just outline a few field in red. The area inside the red lines is in the folio. Yes a solicitor will be require however you will also require him for loan etc so he should not charge too much extra other than registeration fees

Greengrass1

nobeef wrote: »

Regards security and risk reduction. Has anyone created more portfolio numbers so that you are not risking too much of the farm. What is involved in creating more folio numbers? I presume its a job for a solicitor, how much and should I create multiple folio numbers at the same time in case they may be used in the future?

I presume better security means a better rate?

Don't see the reason for making more folios. The bank are going to want security depending on how much your looking for.
Ring up the banks your considering approaching and ask what they require. Get your accountant to help you get what you need and then see who gives you the loan.
Your accountant will tell you a lot.

_Brian

Farmer Pudsey wrote: »

My glass is always half full.

The optimist says it's half full.
The pessimist says it's half empty.

And the engineer in me says the glass is twice as big as it needed to be

nobeef

Farmer Pudsey wrote: »

No once they have adequate security no matter how much extra they will not lower the interest rate. generally you will have to give a personel gaurantee as well so if markets disimprove they will still hunt you. A lot depends on if you think you will need security for a loan in 2-3 or 5 years time. It depends on value and size of farm. It is not that hard a job you can just outline a few field in red. The area inside the red lines is in the folio. Yes a solicitor will be require however you will also require him for loan etc so he should not charge too much extra other than registeration fees

If you were to estimate how much extra would you expect to pay for creating a folio?

5live

dungfly wrote: »

What factors should reduce the interest rates? Where can I haggle?

If you have a history of repayments being met.
If you have security of multiple times the loan.
If you have a cash flow will in excess of the repayment amount.
If you borrow for longer than you need and pay off earlier, maybe just a year more of a loan and pay off a year earlier, ie pay off at the original length of time.
If you have a guarantor.
If you can show the loan will improve profitability.
If you say you are talking to another lender.

Any or a lot of those should help you get a better rate. Be prepared to walk away and come back later. Banks have money to lend and need to lend to make money. AIB, BOI and Ulster Bank are all chasing farmers atm because of the vv low default rate and good profitability. If one bank doesn't offer a good rate then use another.

Don't get caught up in the 'Sure my bank has been good to me' trap. They would cut your throat (not literally) if you fell behind so use their own tactics against them. No loyalty!

Just my experience of the last 13 years:mad:

nobeef

5live wrote: »

If you have a history of repayments being met.
If you have security of multiple times the loan.
If you have a cash flow will in excess of the repayment amount.
If you borrow for longer than you need and pay off earlier, maybe just a year more of a loan and pay off a year earlier, ie pay off at the original length of time.
If you have a guarantor.
If you can show the loan will improve profitability.
If you say you are talking to another lender.

Any or a lot of those should help you get a better rate. Be prepared to walk away and come back later. Banks have money to lend and need to lend to make money. AIB, BOI and Ulster Bank are all chasing farmers atm because of the vv low default rate and good profitability. If one bank doesn't offer a good rate then use another.

Don't get caught up in the 'Sure my bank has been good to me' trap. They would cut your throat (not literally) if you fell behind so use their own tactics against them. No loyalty!

Just my experience of the last 13 years:mad:

Sound advice. Appreciated.

frazzledhome

Reading through the thread, there seems to be an urgency in paying off loans. What's to be gained by paying before the term ends?

It's not something I've ever considered

moy83

frazzledhome wrote: »

Reading through the thread, there seems to be an urgency in paying off loans. What's to be gained by paying before the term ends?

It's not something I've ever considered

I suppose its just nice to be debt free especially if paying it is putting you under pressure to gather it the odd month . I should be mortgage and debt free by the end of the year hopefully , I'm going to chill the beans workwise for the following year then and after that borrow all over again probably :rolleyes:

mahoney_j

frazzledhome wrote: »

Reading through the thread, there seems to be an urgency in paying off loans. What's to be gained by paying before the term ends?

It's not something I've ever considered

Fully agree u take a loan for x peroid and U should pay for it over x peroid.cant see point in going mad when milk price etc is good and then been stuck for cash flow in lean periods.banks won't be too symphatic if u cant keep up with repayments in the long term even if you have been making overpayments in short term

5live

frazzledhome wrote: »

Reading through the thread, there seems to be an urgency in paying off loans. What's to be gained by paying before the term ends?

It's not something I've ever considered

Farmer Pudsey might go into the tax implications but paying off early, before the write-off period for depreciation, reduces the interest payments and frees up cash for other uses. For me, I use the interest saved to invest in water troughs and piping and get a small increase in depreciation over the next few years.

Also, I have a large farm loan for another number of years with the depreciation allowable long gone and it helps a bit in easing the pain of repayments on that loan being mostly taxable.

Farmer Pudsey

Greengrass1 wrote: »

Don't see the reason for making more folios. The bank are going to want security depending on how much your looking for.
Ring up the banks your considering approaching and ask what they require. Get your accountant to help you get what you need and then see who gives you the loan.
Your accountant will tell you a lot.

If you think you will not need to borrow again during the lifetime of the loan then well and good however if loan is over 5-10 years and in the meantime a bit of land comes up that you are interested in Bank will give a better rate if you have other security. It also allows you to shop around rather than dealing with your own bank.

If you have an out farm it is easier to just give that.

_Brian wrote: »

The optimist says it's half full.
The pessimist says it's half empty.

And the engineer in me says the glass is twice as big as it needed to be

I am an optimist well spotted

nobeef wrote: »

If you were to estimate how much extra would you expect to pay for creating a folio?

If you have to get an engineer to mark map in reality you can show him in his office the fields you want in the folio, with registeration fees no I imagine that 200 yoyo's should cover. Ask in legal section

frazzledhome wrote: »

Reading through the thread, there seems to be an urgency in paying off loans. What's to be gained by paying before the term ends?

It's not something I've ever considered

I love to have CA hanging around, if you have spare cash earning only 1-2% in the bank and paying 5+% for money and are displineed and will restore savings then why not. It also gives flexibility in case an opportunity comes up that needs borrowing( all those lads with farms growing weeds may give up at some stage) it gives you a good chance to pay off remaining or roll over a small amount. Alot depends on Interest rates I have two loans that are trackers, so bank only getting repayments.

5live wrote: »

Farmer Pudsey might go into the tax implications but paying off early, before the write-off period for depreciation, reduces the interest payments and frees up cash for other uses. For me, I use the interest saved to invest in water troughs and piping and get a small increase in depreciation over the next few years.

Also, I have a large farm loan for another number of years with the depreciation allowable long gone and it helps a bit in easing the pain of repayments on that loan being mostly taxable.

I dislike borrowing for cars, tractors, washing machines or credit cards. Other than the farm purchasse loans I have only had two other loans since 1993, I had a loan to cover grant for shed and i took a 5K loan at one stage from the credit union for farm stock.

Deepsouthwest

sheebadog wrote: »

Might harm your credit rating to pay off a loan before time.

Sorry for being so slow in getting back to this, went to ground there for a few days with the fine weather! It's a variable loan, I'd have to pay a premium if I wanted to fix it. I'd expect to pay it off much quicker than the 15 yrs, and that definitely won't affect my credit rating, the opposite if anything. I'm an existing customer, so they had security from an old paid off loan which covers the new one

mahoney_j

frazzledhome wrote: »

I've just secured a 20 yr term loan with AIB for land purchase, a few things I've learned along the way. My last major land loan was 11 yrs ago and boy were things different. Experience has taught me that bankers love paper and having your ducks in a row.

1 Met on farm as I always do, how else can they see what you are doing?
2 4 yrs ac's including last years, meeting was in Jan
3 10 yrs profit monitors and herd EBI report
4 Full list of creditors and debitors
5 All bound and nicely presented (they love paper) and it makes it easier

Verbal approval on the day and written in 1 week. Once I received approval the horse trading began. The main stumbling blocks were security, level any type of life cover and their funding premium.

The loan is an On Demand, meaning they can look for full payment at the end of a 12 mth period. This worried me at first and from my research is how all the banks are operating at the moment. Once I considered it I concluded it's as good for me as them as I can move to another bank freely. I will price the loan annually as I can use as a stick to beat them.

The funding premium is the premium they need to pay over the cost of funds as they managed their business so badly in the past. The offer letter was written in such a way that they would be collecting this till the end of the loan. This was the one that took the most negociation as it will be removed at some stage and I wasn't prepared to continue paying it. We eventually agreed on a wording we were both comfortable with.

As far as security was concerned they wanted everything personal guarantees, keyman cover, all assets two kidneys, one eye and my liver. This took some negociation and they wern't one bit happy when I took my life cover with another company, but they got over it. Again the security was negociated to a comfortable level. We need to remember that they are working on the primis that the customer is delighted to get sanction and will sign immediatly. Do not be one bit afraid to refuse and to counter offer on the terms

Rate was the easiest thing to negociate in fact one phone call got it where I was comfortable

My lessons from the experiance is do not be afraid to talk up to them and be prepared

One of the best and most informative posts I've read here in a long time.thanks for that

sheebadog

frazzledhome wrote: »

I've just secured a 20 yr term loan with AIB for land purchase, a few things I've learned along the way. My last major land loan was 11 yrs ago and boy were things different. Experience has taught me that bankers love paper and having your ducks in a row.

1 Met on farm as I always do, how else can they see what you are doing?
2 4 yrs ac's including last years, meeting was in Jan
3 10 yrs profit monitors and herd EBI report
4 Full list of creditors and debitors
5 All bound and nicely presented (they love paper) and it makes it easier

Verbal approval on the day and written in 1 week. Once I received approval the horse trading began. The main stumbling blocks were security, level any type of life cover and their funding premium.

The loan is an On Demand, meaning they can look for full payment at the end of a 12 mth period. This worried me at first and from my research is how all the banks are operating at the moment. Once I considered it I concluded it's as good for me as them as I can move to another bank freely. I will price the loan annually as I can use as a stick to beat them.

The funding premium is the premium they need to pay over the cost of funds as they managed their business so badly in the past. The offer letter was written in such a way that they would be collecting this till the end of the loan. This was the one that took the most negociation as it will be removed at some stage and I wasn't prepared to continue paying it. We eventually agreed on a wording we were both comfortable with.

As far as security was concerned they wanted everything personal guarantees, keyman cover, all assets two kidneys, one eye and my liver. This took some negociation and they wern't one bit happy when I took my life cover with another company, but they got over it. Again the security was negociated to a comfortable level. We need to remember that they are working on the primis that the customer is delighted to get sanction and will sign immediatly. Do not be one bit afraid to refuse and to counter offer on the terms

Rate was the easiest thing to negociate in fact one phone call got it where I was comfortable

My lessons from the experiance is do not be afraid to talk up to them and be prepared

If loan is on demand some % of the loan would have to be non recourse. Otherwise they are not investing in a business they are buying a slave.

frazzledhome

sheebadog wrote: »

If loan is on demand some % of the loan would have to be non recourse. Otherwise they are not investing in a business they are buying a slave.

That was the major bone of contention

ganmo

On demand doesn't sound good, if the bank fails a stress test will they call in your loan with what level of notice? could they make you sell stock to repay at short notice?

frazzledhome

ganmo wrote: »

On demand doesn't sound good, if the bank fails a stress test will they call in your loan with what level of notice? could they make you sell stock to repay at short notice?

I have posted my deal as a guide. I do my own business and I'm removing the post.

sheebadog

frazzledhome wrote: »

I have posted my deal as a guide. I do my own business and I'm removing the post.

Good idea.

ganmo

frazzledhome wrote: »

I have posted my deal as a guide. I do my own business and I'm removing the post.

I was just voicing the concerns I'd have with that condition.

Farmer Pudsey

ganmo wrote: »

On demand doesn't sound good, if the bank fails a stress test will they call in your loan with what level of notice? could they make you sell stock to repay at short notice?

Like everything you have to live in real world. How likly is that to happen. Yes it may but how likly is it be that a bank will demand the loan straight off. The reason I could see is that having been stung by the Trackers when you manage to get a very good rate bank will try to protect itself as well. So that 5 year down they can engage with you about increasing that margin. In reality you can as well.

Thanks be to god they did not do it 10 years ago.

whitebriar

Good post by Frazzled earlier.
You will get a loan if you have the repayment capacity and a good business track record with all the supporting information nicely laid out.

By the way,All loans are repayable on demand, whether you see it in the short conditions or not,I am surprised anyone thinks different.

In practice that's not enforced of course unless you are defaulting on your payments or breach seriously some important condition or other.

sheebadog

whitebriar wrote: »

Good post by Frazzled earlier.
You will get a loan if you have the repayment capacity and a good business track record with all the supporting information nicely laid out.

By the way,All loans are repayable on demand, whether you see it in the short conditions or not,I am surprised anyone thinks different.

In practice that's not enforced of course unless you are defaulting on your payments or breach seriously some important condition or other.

Nope. Not all are on demand.

Deepsouthwest

frazzledhome wrote: »

I have posted my deal as a guide. I do my own business and I'm removing the post.

Fair play for putting it up, but ur prob right to take it down. Some personnel business decisions there, and no doubt u'll have people picking holes in it in a while