Earn money under the Christmas tree

The financing monitor, which was commissioned by the Ministry of Economic Affairs (EZ), shows that in 2017 more companies will have to deal with lower interest rates. It also appears that SMEs (financing volume lower than €1 million) generally pay more than large companies.

The plan also shows that financing smaller companies is considered to be more risky, leading to higher risk premiums. In addition, the other financing costs, such as closing costs, are higher and the conditions under which financing is provided have been tightened.

Moreover, in the agricultural sector, applications for financing are (relatively speaking) most often rejected. Enough reasons for us to provide you with some great tips in these dark days before Christmas.

1. Are you going to pay more or less interest in the coming year?
In this changing environment, it is wise to get a good picture of your financial position. If you are dealing with an interest extension, see if you can combine loans. Check your current contracts and check whether you will have to deal with changes in repayments or conditions. If you have investment plans and want to apply for a loan, be on time. The average turnaround time for applying for financing is easily 7 weeks.

2. Christmas present from Minister Schouten
Minister Carola Schouten, Ministry of Agriculture, Nature and Food Quality, is allocating €75 million for starting young farmers. The farmers' fund will be realized in the first half of 2018. This fund helps young entrepreneurs who are motivated to become farmers in their business succession.

In addition, there is the Guarantee Credit for Agriculture. With this credit, the government guarantees part of the business financing. This guarantee is intended for companies that cannot offer the bank sufficient security when taking out a loan. Check which schemes and subsidies are available and what you are eligible for.

3. There are different flavors!
When you're sitting under that Christmas tree, also take a critical look at your existing financing structure. Combine this with your investment or replacement plans for the coming year and the medium term and, if necessary, draw up your financing plan (in consultation with an advisor).

The financing landscape has changed and you can only use your borrowing capacity with your lender once. If necessary, combine the different forms of financing, such as leasing, supplier credit and/or leasehold. Lease is a great solution, but due to the often short term, it places a relatively large burden on your liquid assets.

4. Sustainability pays off
The loan with a TLTRO discount of up to 0,5% is an initiative of the European Union. The European Central Bank (ECB) makes money available to stimulate the economy. This is a limited amount for banks that participate in the TLTRO program. The minimum amount per loan is €250.000.

In addition, there are special loans for which you are eligible if you are a sustainable frontrunner. For example, you may be eligible for a so-called 'green loan' for sustainable investments, such as solar panels or wind energy.

5. Imagine if the interest rate...?
Finally, prevent interest rate risk and ensure that you can continue to pay the costs of financing if interest rates rise. Imagine that the interest rate rises to 4% and calculate whether you can still pay the interest costs. Limit the interest rate risk by spreading the maturities and loans and also look at the other conditions.

How flexible are these and, if interest rates rise, can you convert the variable interest to a fixed interest or is it possible to make additional repayments? This way you will start 2018 well prepared. 

Trees Rijpkema

Senior Relationship Manager at Farmers Funding

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.