Crop finance for arable and combinable crop farms

An arable cash flow forecast looks nothing like a dairy one. There is no monthly milk cheque, so the account runs down steadily from August to the following summer and refills in a few large receipts. The typical sequence on a winter cropping farm:

• Late summer and autumn. Seed, pre-emergence herbicides, establishment costs and fuel for cultivations and drilling. Merchant and agronomy invoices for this period are often on extended terms, payable after harvest.
• Late winter and spring. The nitrogen bill, fungicide programme and spring cropping inputs. Fertiliser is the single largest variable cost on many farms, and buying early to secure a price means paying earlier.
• Harvest. Contractor bills, drying fuel and labour peak while grain is either sold off the combine or put into store.
• Post-harvest marketing. Stored grain is sold in tranches through the autumn and winter, sometimes into a merchant pool, with payment following each movement.

Two features make this harder than it was. Area-based support has been phased out in England through delinked payments replacing the Basic Payment Scheme, removing a predictable annual receipt that many farms used to clear the overdraft. And weather now regularly breaks the plan: a wet autumn that prevents drilling pushes area into spring crops with different input costs and lower yields, and the cash forecast has to be rebuilt in the middle of the season.

Illustration only. The figures are invented and rounded, and no rates are implied. A family partnership farms 500 hectares of owned and rented land in a wheat, oilseed rape and spring barley rotation. Inputs from September to April total around £300,000, and with merchant terms ending, the current account cannot carry them. The farm arranges a revolving facility sized to the peak shortfall in March, drawing it as invoices fall due and clearing it from grain movements between August and January. A new continuous-flow dryer goes on hire purchase with one annual payment set for October. The bank that holds the land charge is told in advance, so the arrangement does not breach its existing covenants.

The obvious risk is repaying a seasonal loan from a crop that disappoints. A short facility that assumes a normal harvest can become a problem after a drought, a wet harvest or a price collapse, so build the forecast on a cautious yield and price and agree in advance what happens if the facility cannot be cleared. Lenders frequently ask for personal guarantees from partners, and a charge over land puts the holding at risk. Rolling a seasonal shortfall into longer-term borrowing year after year is a sign that the farm needs restructuring rather than more crop finance; our page on farm refinancing explains that route. Borrowing of £25,000 or less by sole traders and small partnerships can be regulated consumer credit, which brings additional protections. Alternatives include changing marketing so more grain is sold at harvest, reducing area of high-input crops, and agreeing Time to Pay with HMRC on a tax bill rather than borrowing for it.