WHAT'S THE BEST BANK FOR FARMERS?

AT Aloss

Member
NFFN Member
All banks had a reputation for mis-selling other products at one point or another. In the case of HSBC they mis-sold us an interest rate swap as a pre-requisite to a mortgage for a farm, that damn near lost us the farm & cost us our stock in trade due to a hidden credit line liability against us valued at US$790,000. Imagine having an extra £450,000 overdraft that you were being charged for but couldn't use - that's the equivalent of the hidden credit line.

I have spoken to other farmers who had experienced the same problems with RBS, Lloyds Banking Group (HBOS), Clydesdale/Yorkshire, HSBC, Barclays, all of them. British "High Street Banks" now operate in the most deregulated environment in the world, making it the most customer unfriendly with regards to mis-selling & repossessions. It's easy to blame rogue banking officers but the truth is it's unlikely to be the fault of an individual. European agriculture is largely funded by credit unions, mutuals & cooperatives like Credit Agricole or specialists like Rabobank (also operating in the farm sector in the USA). The Chinese banks should be viewed with some suspicion due to land grabs happening elsewhere around the world.

The deregulation of the UK banking sector created a gambling affliction amongst historically very reliable lenders, to the extent that many have weak balance sheets relying on overnight funding from the international money exchanges to stay afloat. Be more wary of banks offering higher loan to value, they are the ones offering tempting deals, but they don't tell you what they do with your security - more often than not bundling it up with mortgage bonds & rehypothecating it (sometimes up to 8 times) to other lenders. This makes it very difficult to get your security released if you pay a loan off early.

The balance sheets of the banks are propped up by rehypothecation - an example of this would be: your farm is worth £1,000,000 - the bank discounts that to only 70% or £700,000 to account for the future potential sale of a distressed asset. The bank will lend you 65% of the 70% discounted value or £455,000. The value of your asset sits on the bank's balance sheet at £1,000,000 which looks great for the shareholders, it looks even better every time it is re-hypothecated, as it adds another £1,000,000 onto the bank's balance sheet. It's a murky old world.

A couple of stumbling blocks that farmers don't understand:
1: Banks will take security over the live & dead stock of a business, but that will not generate a positive contribution towards your business valuation in the event of a foreclosure, because banks attach no value to live & dead stock in the event of your business being liquidated - they go after land & property.
2. Ask about hidden credit lines - they can be for services that you think are provided free of charge with your bank account like a credit card or a BACS facility or even where they have said they have used a Chattels Mortgage (a form of asset finance), but these all add up & are liabilities against your overall liquidity, meaning you could be lured into thinking you are able to borrow more but find out that the bank's Credit & Risk Management team think you are already maxxed out with credit.
3. Do not rely on a re-valuation of your property to help you out in the event of a couple of bad trading years - it is good banking practice to foreclose on an asset to help banks rebuild their tattered balance sheets - "buy low (or grab low) & sell high!" British agriculture could be sleep walking straight into this crisis.
4. Apply to the bank for your own DSAR (Data Subject Access Review) - this is every piece of information the bank holds on you; both correct & wrong! You might find the problem is not the bank but the information they hold about you.

Finally AMC usually work at around 50% loan to value but generally lend on an agent's valuation & then leave you alone, with no need to review until the end of the term.
 
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AT Aloss

Member
NFFN Member
It’s all about how much you want/need to borrow and who you can get to talk to so they can make some money out of you - Unless it’s HSBC which, once they take a dislike to you need ditching as soon as possible before they triple their fees to try and send you towards bankruptcy “Because they’re good for it” !
Too true - they love to try & get anyone into Special Situations where they can coin it in....
 

Phil P

Member
Arable Farmer
Location
North West
We where with Natwest and had been for a very long time, couldn’t really fault them with anything but a change in management made them harder to deal with. We have a mortgage on some land and got made an offer from Clydesdale (now virgin) to move to them, the offer was so good our Natwest relationship manager told us to move as they couldn’t get anywhere near it! I also think Natwest where trying to lessen their ag sector as well.
However our account has also commented on how much we’ve saved in bank charges and interest over the last couple of years so believe we made the right decision.
Have a relationship manager who’s a farmers son so knows the industry and always answers the phone. He also comes to our discussion group so get to have an informal chat about things over a pint once a month which is good (this probably won’t happen with all their relationships managers though).
We’ve not had an overdraft for a number of years but had a big expansion last year so needed one to help the cash flow, no problem setting one up and didn’t charge us when we needed to extend it a bit due to an unforeseen experience. Really can’t say anything bad about them to be fair.
 

AT Aloss

Member
NFFN Member
We where with Natwest and had been for a very long time, couldn’t really fault them with anything but a change in management made them harder to deal with. We have a mortgage on some land and got made an offer from Clydesdale (now virgin) to move to them, the offer was so good our Natwest relationship manager told us to move as they couldn’t get anywhere near it! I also think Natwest where trying to lessen their ag sector as well.
However our account has also commented on how much we’ve saved in bank charges and interest over the last couple of years so believe we made the right decision.
Have a relationship manager who’s a farmers son so knows the industry and always answers the phone. He also comes to our discussion group so get to have an informal chat about things over a pint once a month which is good (this probably won’t happen with all their relationships managers though).
We’ve not had an overdraft for a number of years but had a big expansion last year so needed one to help the cash flow, no problem setting one up and didn’t charge us when we needed to extend it a bit due to an unforeseen experience. Really can’t say anything bad about them to be fair.
Rather than reducing their exposure to Ag clients; NatWest wouldn't have been interested, if you didn't run a big overdraft which offers them more opportunities to earn money. If you don't run a large overdraft & you are a high net worth individual looking for business loans, I only hear good reports about Handelsbanken.
 

Cereal Killer

Member
Livestock Farmer
Rather than reducing their exposure to Ag clients; NatWest wouldn't have been interested, if you didn't run a big overdraft which offers them more opportunities to earn money. If you don't run a large overdraft & you are a high net worth individual looking for business loans, I only hear good reports about Handelsbanken.
We have just left Handelsbanken. They didn't seem to offer products to suit agricultural customers.
Also an expensive way to bank, not least because they set their own base rate!
 

Blue.

Member
Livestock Farmer
We’re well and truly into the years of “computer says no” all banks are the same,I avoid anything to do with bank managers,I only met one when we bought our farm.
 

Little Karoo

Member
Mixed Farmer
Location
Taplow
All banks had a reputation for mis-selling other products at one point or another. In the case of HSBC they mis-sold us an interest rate swap as a pre-requisite to a mortgage for a farm, that damn near lost us the farm & cost us our stock in trade due to a hidden credit line liability against us valued at US$790,000. Imagine having an extra £450,000 overdraft that you were being charged for but couldn't use - that's the equivalent of the hidden credit line.

I have spoken to other farmers who had experienced the same problems with RBS, Lloyds Banking Group (HBOS), Clydesdale/Yorkshire, HSBC, Barclays, all of them. British "High Street Banks" now operate in the most deregulated environment in the world, making it the most customer unfriendly with regards to mis-selling & repossessions. It's easy to blame rogue banking officers but the truth is it's unlikely to be the fault of an individual. European agriculture is largely funded by credit unions, mutuals & cooperatives like Credit Agricole or specialists like Rabobank (also operating in the farm sector in the USA). The Chinese banks should be viewed with some suspicion due to land grabs happening elsewhere around the world.

The deregulation of the UK banking sector created a gambling affliction amongst historically very reliable lenders, to the extent that many have weak balance sheets relying on overnight funding from the international money exchanges to stay afloat. Be more wary of banks offering higher loan to value, they are the ones offering tempting deals, but they don't tell you what they do with your security - more often than not bundling it up with mortgage bonds & rehypothecating it (sometimes up to 8 times) to other lenders. This makes it very difficult to get your security released if you pay a loan off early.

The balance sheets of the banks are propped up by rehypothecation - an example of this would be: your farm is worth £1,000,000 - the bank discounts that to only 70% or £700,000 to account for the future potential sale of a distressed asset. The bank will lend you 65% of the 70% discounted value or £455,000. The value of your asset sits on the bank's balance sheet at £1,000,000 which looks great for the shareholders, it looks even better every time it is re-hypothecated, as it adds another £1,000,000 onto the bank's balance sheet. It's a murky old world.

A couple of stumbling blocks that farmers don't understand:
1: Banks will take security over the live & dead stock of a business, but that will not generate a positive contribution towards your business valuation in the event of a foreclosure, because banks attach no value to live & dead stock in the event of your business being liquidated - they go after land & property.
2. Ask about hidden credit lines - they can be for services that you think are provided free of charge with your bank account like a credit card or a BACS facility or even where they have said they have used a Chattels Mortgage (a form of asset finance), but these all add up & are liabilities against your overall liquidity, meaning you could be lured into thinking you are able to borrow more but find out that the bank's Credit & Risk Management team think you are already maxxed out with credit.
3. Do not rely on a re-valuation of your property to help you out in the event of a couple of bad trading years - it is good banking practice to foreclose on an asset to help banks rebuild their tattered balance sheets - "buy low (or grab low) & sell high!" British agriculture could be sleep walking straight into this crisis.
4. Apply to the bank for your own DSAR (Data Subject Access Review) - this is every piece of information the bank holds on you; both correct & wrong! You might find the problem is not the bank but the information they hold about you.

Finally AMC usually work at around 50% loan to value but generally lend on an agent's valuation & then leave you alone, with no need to review until the end of the term.
Everything you say is very interesting and explains a lot of things that have happened to me historically.
Thanks for your detailed post.
We will need to borrow around 60% of the Farms value so that may cut AMC out of the picture.
 

AT Aloss

Member
NFFN Member
Everything you say is very interesting and explains a lot of things that have happened to me historically.
Thanks for your detailed post.
We will need to borrow around 60% of the Farms value so that may cut AMC out of the picture.
The AMC's 50% valuation is usually based on one of their Agencies agent's valuations which is often the most helpful thing - local knowledge can make the difference with a proper valuation*. You may end up with less liquidity than you think by chasing the 65% LTV based on a discounted desktop valuation (rather than a Red Book* valuation). Speak to them & explain what it is you are wanting to achieve
 
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Mc115reed

Member
Livestock Farmer
I use NatWest…
They’re good too deal with and the app is easy too use but any borrowing is a slow long drawn out process with a different idiot too talk too every time that wants too go through everything you did with his mate last week all over again
 

Chae1

Member
Location
Aberdeenshire
May be setting up a new business soon, what is the Oxbury bank like anyone?

We bought fert through frontier. Pay January. Finance through oxbury.

I eventually told the guy to stick it.

Was 1load of fertiliser. Was wanting to see farm accounts for past 3 years. Passport of all partners, utility bills with proof of address.

Have dealt with frontier for years.
 

Mc115reed

Member
Livestock Farmer
We bought fert through frontier. Pay January. Finance through oxbury.

I eventually told the guy to stick it.

Was 1load of fertiliser. Was wanting to see farm accounts for past 3 years. Passport of all partners, utility bills with proof of address.

Have dealt with frontier for years.
Don’t get why finance people ask too see accounts … accounts only show what you wanted the tax man too see and don’t really bare much relevance too how good your business is
 

Cowabunga

Member
Location
Ceredigion,Wales
Do you have a Relationship Manager? Also is the APP easy to use. Sorry I know these sound strange questions but we went with STARLING and found our Accountant can't get Access to their Accounts Software plus App doesn't generate Receipts + no one specifically deals with business Accounts.
I have a relationship manager with NatWest but smaller businesses only have a call centre to deal with I believe. High borrowers will retain a business manager still I think.

The current wisdom is that with the next ten years there will be no bank branches left. Only regional centres. In Wales it might be one in Liverpool for the North and one in Cardiff or Bristol for the South. Everything else and all business dealings done remotely through the Web and Apps with only telephone contact with managers who may visit larger clients occasionally.
I used to have a very useful and enjoyable [for both parties] annual visit from a regional business manager when I was younger and keener. Due to reorganisations and my consolidated business as I got older, plus the health lockdowns of late, I’ve never met my current relationship manager, but do get on well with him by phone and email when necessary. It has been very necessary during the past year due to this business owner’s identification anti-money laundering palaver.
 

Cowabunga

Member
Location
Ceredigion,Wales
It’s all about how much you want/need to borrow and who you can get to talk to so they can make some money out of you - Unless it’s HSBC which, once they take a dislike to you need ditching as soon as possible before they triple their fees to try and send you towards bankruptcy “Because they’re good for it” !
HSBC are probably the worse bank to deal with currently, going from my contacts, one of whom used to work with them and still has his own contacts with staff there. Just one little instance is that the local WI [yes Women’s Institute] has their account with HSBC and there are only 15 members, mostly over 70 years of age, and HSBC is putting them through this money-laundering identification stuff at the moment and have also started charging them an annual fee for the account [around £60] plus a charge for every transaction. The account generally averages a positive balance of around £350 and has never been overdrawn.
Basically and fairly obviously, HSBC are trying to get them to close the account.
 

SFI - What % were you taking out of production?

  • 0 %

    Votes: 79 42.5%
  • Up to 25%

    Votes: 65 34.9%
  • 25-50%

    Votes: 30 16.1%
  • 50-75%

    Votes: 3 1.6%
  • 75-100%

    Votes: 3 1.6%
  • 100% I’ve had enough of farming!

    Votes: 6 3.2%

Red Tractor drops launch of green farming scheme amid anger from farmers

  • 1,287
  • 1
As reported in Independent


quote: “Red Tractor has confirmed it is dropping plans to launch its green farming assurance standard in April“

read the TFF thread here: https://thefarmingforum.co.uk/index.php?threads/gfc-was-to-go-ahead-now-not-going-ahead.405234/
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