The hassle for money only increases further

Growing is necessary. After all, anything that doesn't grow doesn't survive. Historically, many agricultural entrepreneurs finance the growth and development of the company with their own money. And if that isn't available enough, they - in addition to the family - have been switching more and more with their house banker since the 70s. From the credit crisis in 2010 to today, we have seen the banking unrest continue to increase, which makes borrowing more difficult and, above all, more expensive. Anyway, there will be more alternatives to bank financing. And these different forms of financing can easily be combined with each other.

You go to the bank with your plan and they can fill in your financing request. At least you think so. In reality, banks are increasingly reluctant to provide financing. In addition, almost all financing applications below the €1 million limit are more often processed through automated systems that make decisions based on data and are focused on standard solutions. Popularly said: 'computer says yes or computer says no' and you have to make do with that.

Credit growth declined
Lending growth across Europe has slowed recently. The cause lies in the tightening interest rate policy of the European Central Bank (ECB). The result is a decreasing availability of money with an increasing cost price. Mortgage interest rates are now four times higher than in 2021, combined with considerably tightened lending conditions. Recent research shows that credit requirements have been tightened to a level that we have not seen for years. And it is expected that the end of this is not yet in sight.

All this means that, slowly but surely, bank financing is in relative decline. This is increasingly supplemented with capital from various other sources such as private financiers, crowdfunding and leases. The interest rates at these parties are also not low, but the difference with the banks is slowly narrowing. In this way, the required capital and the risks are spread. It is in your interest as a credit applicant that this is done as equitably as possible. And here is a tension. Although the bank can take a beating, in most cases it will strive to bear as little risk as possible itself.

Ask about independent advice
Since the bank is often also an adviser in addition to the credit provider, the question arises as to how independently it can still advise. Naturally, the bank has extensive knowledge of financing and knows the financial position of the entrepreneur. There is also another side to it. We know that she – whether voluntarily or not, rightly or wrongly – has thoroughly understood her own interests and visibly acts more in accordance with them. To my mind it's like 'we're still close friends, although we're starting to differ on more and more points'.

With this advancing insight, I say: dare to return to that earlier and now somewhat outdated belief that the bank takes care of you first. You really have to do that yourself, but maybe you see it differently.

Peter Pals

Peter Pals is an entrepreneur at Farmers Funding & Advies and grew up on a farm. From his farming heart, he has decided to build up a business for business, financial and tax advice for agricultural entrepreneurs.

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