NI farmers must be proactive on debts

While farmers face a period of lower prices due to the coronavirus pandemic, where swift action is taken now it will help ensure businesses get through this difficult time, advises dairy business consultant Jason McMinn.

“Where necessary, I would advise farmers to get on to their hire purchase agreement holders and arrange to have payments deferred for three months in the first instance. In the last dairy downturn, the banks took all of the hit, and they won’t want to do that again,” said McMinn.

With farmers facing lower prices, higher feed costs, marts closed and some farm staff self-isolating due to COVID-19, there are many valid arguments to be put to hire purchase companies, suggested McMinn.

He is also a strong advocate of banks moving to interest-only payments for the next few months, as opposed to offering other loan packages, as happened when milk prices fell in 2016.

“Banks should go interest-only on everything and press the pause button until this is all over. In the last downturn it worked far better than anything else – we need to get this right at the outset,” he said.

Cormac McKervey from the Ulster Bank said that the bank had no issue putting customers with a good repayment history on to interest-only repayments but would like to see the same arrangements applying on repayments made to asset finance companies.

However, the reality is that while going interest-only will release some cash, it might not be enough in some cases.

“All farmers should do a cashflow budget. If there is a gap, we can look at other things,” said McKervey.

That could be an extension of an overdraft facility, but that would probably come with a rearrangement fee and potentially a new rate. Another alternative is the UK government’s coronavirus business interruption loan scheme (CBILS). Under the scheme, which offers loans to small businesses (including farmers) on repayment terms of up to six years, government will pay interest and fees for the first 12 months.

“The scheme makes sense for someone who only needs a temporary overdraft increase,” said McKervey.

Also commenting, Rodney Brown from Danske Bank said that his organisation will do what it can to support customers, and is currently monitoring possible disruptions to cash flow.

“I would strongly encourage any of our customers who are concerned about the impacts of coronavirus on their business to contact their Danske relationship manager or business adviser who will discuss the best solution individual to their needs,” he said.

Speaking in the Stormont chamber this week, Agriculture Minister Edwin Poots highlighted that the dairy sector does tend to have the largest debts.

“Seven figures exist within dairy farming – it is not super common but it is not irregular either. That is going to cause real problems if milk price drops off a cliff,” he said.

As a result, he maintained that he has urged both the UK government and the EU to respond quickly, and not allow a crisis to develop.

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