Farmers are being warned of the danger of giving too much security on their borrowings to lenders.

Many farms have much, sometimes all, of their farmland held in security in exchange for loans.

Instead, the advice is that a portion of the farm should be selected that is of an appropriate value to the lending facilities farmers may require. Place it in it’s own folio, and hand that over, retaining the remaining deeds unencumbered.

There are a few benefits to taking such steps.

Firstly, if farmers want to arrange a loan with a different financial institution, you have separate security to offer. This frees farmers up to approach other lenders to augment or to replace the lender. Such a freedom becomes extremely important if your relationship with your lender becomes problematic.

Also, farmers who find themselves with impaired loans where the security held is in excess of the debt report finding it harder to negotiate, particularly with a vulture fund. “They hold all the cards,” one farmer who wished not to be named told the Irish Farmers Journal.