Banks

[SP11]

Anybody else having issues with their bank? It’s a long story but basically we had an overdraft with HBOS of 155k. They weren’t comfortable with us at that level and asked us to look into alternative finance. We got a mortgage with AMC to cover 150k whilst working with our “relationship manager” through harvest asking initially for a working overdraft of 30k but we said we would get back to him as harvest progressed as we may need a bit more. So as harvest progressed the weather got worse and ended in a salvage mission. We told the banker this and requested 50k. That was the straw that broke the donkeys back! We were refused an overdraft. This was totally unexped as the bank still had security over one of our properties, our assets are worth around 1.5m and we have been customers with the Bank Of Scotland for 60 years.

we then went to our local MP to see if he could help. Him and his team put alot of effort into it with weeks of work. The banks communication with Us or the MP was poor to say the least! It was so difficult to get through to anyone with any authority. The “head of agriculture” said he had “no jurisdiction over our account” so that diverted all the MP correspondence away from him.

In the end the MP got someone to speak to at the bank, whom we were not allowed to contact directly, who changed the direction of the MP. They are now siding with the bank claiming we could be “insolvent”. That’s not possible considering our level of debt is minimal against our assets.

We have asked if we could get a lower overdraft but been refused point blank. This now means we have no working capital and are forced to sell assets. We have struggled through this trying to defend our business but as soon as the “secret person” spoke to the MP we are left on our own. We tried to re finance some of our machinery but because we have had direct debits bouncing back our credit rating is ruined. And now we are in the midst of the covid 19 pandemic it’s making it harder to sell some things but also all the financial services are stretched.

Has anyone else had or having issues like this? My next step is looking into a no win no fee case against the bank and few employees due to ruining our business reputation.

Had the bank said at the beginning that we might find it difficult to get an overdraft we could have organised alternative finance then. But because of how it all happened they have destroyed our business with a severe toll on our mental health.

My advice is be very wary of banks, especially Lloyds or Bank Of Scotland. Look up Noel Edmonds case against them.

 

[midlandslad]

Have you tried getting an overdraft with another bank or increasing the borrowing with AMC?

 

[jackrussell101]

From what you say given your equity you're actually in a very strong position.

It sounds to me like you need a refinance. We had the exact same issue. We had equity but had a cashflow problem. Refinanced away from Lloyds to Barclays taking mortgage and overdraft all together in one new long term loan and touch wood has solved it. We found Barclays much more friendly.

 

[GeorgeK]

I've never understood why banks seem to think this way, but companies like Thomas Cook can borrow vast amounts because of high cash flow, even though they have crippling liabilities and lose money every year

 

[jackrussell101]

If you need help I know of an excellent agricultural consultant who sorted us out, PM me if you want.

 

[britt]

We had a similar situation with Lloyds 35 years ago.
We went to another bank and were amazed how different the attitude was. We moved to them and they even gave us a better deal on the long term loan than the AMC, even after having to pay to get out off the AMC mortgage.
That one manager lost that branch a lot of farm accounts.
The Yorkshire Bank are actively looking for farmer customers, try them or the their parent bank, I think it's the Clydesdale Bank.
If another bank is not interested, your bussiness is in a worse state than you want to admit to.

 

[Johnnyboxer]

Yep .....once a bank has it in for you there is little room forward

I would have moved sooner, when you moved to AMC (however they are still part of Lloyd’s banking group and Lloyd’s and HBOS and Bank of Scotland) so maybe out of the frying pan and Into the fire

Get away to another bank completely if you can

You state plenty of asset cover, however that isn’t the driver nowadays...serviceability is the key measure now

Banks won’t lend because you have 4x asset cover only - you have to prove positive cash flow and serviceability to cover the debt (often difficult in farming with thin margins and greater variance to profit or loss situations - weather & yields/ commodity prices)

Banking has changed now and all they are worried about is successful repayment and not just strong asset cover (like in days of old)

 

[jendan]

From what you say given your equity you're actually in a very strong position.

It sounds to me like you need a refinance. We had the exact same issue. We had equity but had a cashflow problem. Refinanced away from Lloyds to Barclays taking mortgage and overdraft all together in one new long term loan and touch wood has solved it. We found Barclays much more friendly.

How long have they solved it for? Barclays are no better than Lloyds or any other.If you have a poorer set of accounts going forward,they can pull a long term loan just the same.

 

[britt]

If your dept. has been steadily increasing over the years you will have to show some ideas of how you are going to change things. We all have bad years, but you can't make excuses every year.

 

[jackrussell101]

How long have they solved it for? Barclays are no better than Lloyds or any other.If you have a poorer set of accounts going forward,they can pull a long term loan just the same.

No bank can pull a secured long term loan in unless it is defaulted on. Unsecured overdrafts are another matter and can be called in at anytime but it is unlikely unless you keep asking for extensions.

 

[Clive]

your gearing / level of solvency is only part of the equation - banks don’t want to have to make you sell up to see ever their cash back !

what they will need is budgets and cash flows that show ability of the business to repay the loans / overdraft from trading profits over a reasonable period

without that would you lend the money if you were in their shoes ?

 

[Clive]

I've never understood why banks seem to think this way, but companies like Thomas Cook can borrow vast amounts because of high cash flow, even though they have crippling liabilities and lose money every year

big business tend to “borrow” from shareholders and bond markets etc not banks, they constantly dilute and raise ..... lot of it going on in the ag startup world and imo its all a bit of a pyramid scheme if your not careful !

 

[Johnnyboxer]

No bank can pull a secured long term loan in unless it is defaulted on. Unsecured overdrafts are another matter and can be called in at anytime but it is unlikely unless you keep asking for extensions.

So can secured overdrafts.............

 

[jendan]

No bank can pull a secured long term loan in unless it is defaulted on. Unsecured overdrafts are another matter and can be called in at anytime but it is unlikely unless you keep asking for extensions.

Yes they can! Barclays.Its in the small print. If you complain they just say,"well,we will pull your overdraft,and although you have not defaulted yet,you soon will" . The end result is that they get their long term loan back regardless.

 

[Johnnyboxer]

your gearing / level of solvency is only part of the equation - banks don’t want to have to make you sell up to see ever their cash back !

what they will need is budgets and cash flows that show ability of the business to repay the loans / overdraft from trading profits over a reasonable period

without that would you lend the money if you were in their shoes ?

Exactly, once it keeps going the wrong way with cumulative losses, then they soon put a stop to it

To the OP SP11 - The BoS Manager agreed £30k at harvest, yet you went back for £50k and he said NO

 

[SP11]

Thanks for all the reply’s so quickly! We tried to expand on our AMC borrowing but because our first direct debit bounced, although we paid it a few days later, they couldn’t help us.
We have been in talks with Barclays but because everyone and their dog is having financial strains at the moment it’s kind of at a standstill at the moment. I emailed the Barclays manager the other day but still waiting a reply. He’s local and we have his number so will try calling this week to see if we can get somewhere. We’ll probably be easy enough to get an account with them but will take a while to sort out borrowing to get security etc set up, especially just now!
We have an old farm steading we have planning permission for 3 units. It is next to an old slatted slurry store and silage pit which we were aiming to get planning for at least another 3 units this year. We have built a new cattle court as a replacement building, which is what the policy asks for. This has all cost money but at the end of it should pay off. I’m using the word should now because of the pandemic! We have been working with SAC consulting with our cash flow. We have been increasing our cow number which has had a positive effect on our accounts but the bank weren’t interested as its money that’s been spent!

 

[jendan]

Thanks for all the reply’s so quickly! We tried to expand on our AMC borrowing but because our first direct debit bounced, although we paid it a few days later, they couldn’t help us.
We have been in talks with Barclays but because everyone and their dog is having financial strains at the moment it’s kind of at a standstill at the moment. I emailed the Barclays manager the other day but still waiting a reply. He’s local and we have his number so will try calling this week to see if we can get somewhere. We’ll probably be easy enough to get an account with them but will take a while to sort out borrowing to get security etc set up, especially just now!
We have an old farm steading we have planning permission for 3 units. It is next to an old slatted slurry store and silage pit which we were aiming to get planning for at least another 3 units this year. We have built a new cattle court as a replacement building, which is what the policy asks for. This has all cost money but at the end of it should pay off. I’m using the word should now because of the pandemic! We have been working with SAC consulting with our cash flow. We have been increasing our cow number which has had a positive effect on our accounts but the bank weren’t interested as its money that’s been spent!

I would be very wary of going to Barclays.They are no better than any others.

 

[snarling bee]

We've been with Lloyds for at least 60 years. We have had a letter saying that we should not deal with the local ag. manager, but the d!ckhead in the branch. I am tempted to move bank just for that reason.

 

[britt]

The banks got a lot of stick in the late 80s for lending against farms and were then painted as the villains when farmers had to sell up to pay the dept. when interest rates got to 16% base and depts. spiralled.
They now take the attitude that they are there to help business grow, not help you erode your capitol.

 

[livestock 1]

Banks have changed the way they assess the value of your business. Assets are worthless (they say) until you haven’t any! Net worth and cash flow is what they are after and they’ve even recalculated how they have got to your net worth value. I was told you can borrow up to 60% of your asset value with amc without strong accounts if this will help but I don’t know if this has changed.