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Finance
February 9, 2023
4 mins

Financing Agriculture Equipment to Boost Cashflow

Key take away points:

  • How to maintain cashflow in a highly seasonal industry
  • How to improve cashflow with asset financing
  • How agriculture businesses can utilise invoice factoring
  • What to look for in an asset finance broker

Agriculture is a highly seasonal industry in the UK, with revenue generated in lump sums at specific times of the year, which can create cash flow gaps during the off-season. Additionally, a lot of agriculture companies have high operating costs, may need to invest in long-term growth projects, and are subject to various uncertainties, all of which can impact a company's revenue and cash flow. Financing your agriculture equipment can help improve your cash flow by spreading the cost of the equipment over time, allowing you to better manage your cash flow and invest in growth opportunities. By doing so, you can maintain day-to-day operations, make necessary investments, and navigate the uncertainties of the industry more effectively.

Benefits of Having a Good Cashflow for Growing Businesses

Good cash flow is essential for agriculture companies looking to grow and develop their business in the UK. It provides access to capital from lenders or investors, which is critical for financing growth projects or making investments in new equipment, land, or technology. Good cash flow provides flexibility, allowing companies to take advantage of opportunities as they arise, such as purchasing equipment or acquiring new land. It also helps maintain financial stability and avoid financial strain, which is particularly important during periods of economic uncertainty or market volatility. Good cash flow improves an agriculture company's creditworthiness, making it easier to secure loans and financing at more favourable terms.

Cashflow Finance Solutions for Agriculture Businesses

Invoice factoring is a financing option that allows agriculture businesses in the UK to improve their cash flow by selling their outstanding invoices to a factoring company in exchange for immediate cash.

Here's how it works: when an agriculture business sells a product or service, they create an invoice and send it to the customer, who is usually given around 30, 60, or 90 days to pay. In the meantime, the business may need cash to cover expenses like payroll, equipment, or supplies. Instead of waiting for the customer to pay, the business can sell the outstanding invoice to a factoring company at a discount, usually around 80-90% of the total value. The factoring company then collects payment from the customer when the invoice is due and returns the remaining balance (minus their fee) to the agriculture business.

There are a number of benefits to using invoice factoring services to keep a strong cash flow. Here are a few reasons why you should consider invoice factoring for your agriculture businesses:

  • Immediate cash: Invoice factoring provides immediate capital for agriculture businesses, which can be used to cover expenses, invest in growth opportunities, or manage day-to-day operations.
  • Improved cash flow: By selling outstanding invoices, agriculture businesses can improve their cash flow and avoid the cash flow gaps that can occur when waiting for customers to pay.
  • No debt: Invoice factoring is not a loan, so it does not create debt for the agriculture business. This can be a valuable option for businesses that may not qualify for traditional loans or do not want to take on additional debt.
  • Outsourced collections: Invoice factoring companies often provide collections services, which can save agriculture businesses time and resources by outsourcing the collections process to a third party.

Overall, invoice factoring can be a valuable option for agriculture businesses in the UK to keep a strong cash flow, providing immediate cash, improved cash flow, and outsourced collections, without creating additional debt.

How Financing Assets Can Boost Spending Power Without Killing Cashflow

Asset finance is a financing option that allows agriculture businesses in the UK to acquire the equipment or assets they need to grow and develop their business without tying up their cash flow. Here's how it works:

Instead of paying for the equipment upfront, the agriculture business can obtain financing from an asset finance provider, who will purchase the equipment and lease it back to the business over a fixed period. This allows the business to spread the cost of the equipment over time, without depleting their cash reserves.

There are several benefits to utilising asset finance for agriculture businesses in the UK:

  1. Improved cash flow: By spreading the cost of the equipment over time, asset finance allows agriculture businesses to improve their cash flow and avoid large upfront costs that can put a strain on their finances.
  2. Access to equipment: Asset finance provides agriculture businesses with access to the equipment they need to grow and develop their business, without having to pay for it all at once.
  3. Flexibility: Asset finance agreements can be tailored to meet the specific needs of the agriculture business, including the length of the lease term and the type of equipment being financed.
  4. Tax advantages: In many cases, asset finance can provide tax advantages for agriculture businesses, such as allowing them to claim tax relief on the lease payments.

Examples of assets that can be financed through asset finance include:

  • Tractors and Harvesters - John Deere, New Holland, Massey Ferguson, and Case IH.
  • Irrigation equipment - Pivot Irrigation Systems, Drip Irrigation Systems, and Mobile Irrigation Systems.
  • Livestock equipment - Feeding systems, Watering systems, and Handling systems
  • Storage facilities - Grain Silos, Hay Barns, and Livestock Sheds.
  • Vehicles - Pickup Trucks, Trailers, and ATVs

Utilising asset finance can be a smart way for agriculture businesses in the UK to boost their spending power without killing their cash flow, providing improved cash flow, access to equipment, flexibility, and several tax advantages.

Working With Finance Brokers

Overall, agriculture businesses in the UK should work with a broker that understands their unique needs and can provide the best solutions for their specific needs. Here are some of the reasons why agriculture businesses in the UK should work with Bluestone as their asset finance broker:

  1. Specialisation in Agriculture Finance: At Bluestone, we have extensive experience and expertise in providing asset finance solutions to agriculture businesses in the UK. We understand the unique challenges and opportunities facing the agriculture industry, and we have tailored our services to meet the specific needs of agriculture businesses.
  2. Wide Range of Products: We offer a wide range of asset finance products to suit the needs of agriculture businesses in the UK, including hire purchase, finance lease, operating lease, and asset refinancing. This allows us to offer flexible solutions that can be tailored to meet the specific needs of each agriculture business.
  3. Strong Relationships with Lenders: We have developed strong relationships with a wide range of lenders, including banks, specialist lenders, and alternative finance providers. This allows us to access a wide range of funding options and secure competitive rates for our agriculture clients.
  4. Tailored Solutions: We work closely with our agriculture clients to understand their unique needs and develop tailored solutions that meet their specific requirements. This includes providing advice on equipment selection, finance options, and cash flow management.
  5. Excellent Customer Service: At Bluestone, we pride ourselves on providing excellent customer service to our clients. Our team of experienced finance professionals are dedicated to providing responsive and personalised service to help our agriculture clients grow and develop their business.

If you are an agriculture business in the UK struggling with cash flow, our team of experts are here to come up with the solutions you need. By spreading the cost of equipment over time, financing can help you manage your cash flow better, invest in growth opportunities, and navigate the uncertainties of the industry. Invoice factoring and asset finance are two great financing options that can help your business thrive.

At Bluestone, we offer a range of finance solutions for agriculture businesses, and our team of experts are always ready to help. Contact us today to learn more about how we can help your agriculture business succeed.

BS.202309.01BL13
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