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Make the most of Single Farm Payments
1:17pm Friday 13th December 2013 in Farming
AS Single Farm Payments (SFP) begin to land in bank accounts, farmers have been advised to assess the best way of using them.
Alick Jones, agriculture policy director for Lloyds Bank, said they would provide a welcome injection of cash for some to reduce overdrafts, but for some there could be other options.
He said: “The SFP will be the largest single credit into many farm bank accounts this year. Because of this, it’s worth considering whether there is any major expenditure (eg taxation) or key investment pending, particularly in the short term.
“If this is the case, it’s worth reflecting on whether it would be appropriate to ring fence some of the funds to keep them separate from your day-to-day trading.”
He said many businesses would want to reduce overdraft borrowings, particularly if these were increased to help the business manage the effects of the appalling weather in 2012/13.
Mr Jones said: “Receipt of the SFP could be the trigger to think about whether now is the appropriate time to restructure the existing overdraft into a longer term loan while interest rates remain relatively low. This will allow the business to keep moving forward while bringing borrowings into a more manageable structure.
“However, if there are upcoming investments in farm efficiency or asset purchases planned in the next few months, then it could be an option to place some of the SFP funds to one side to ensure the planned spending does not get caught up with normal trading expenditure. Placing the funds in an interest-bearing account or short term deposit may be an option,” he said.
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