Ulster Bank has money to lend and Ailish Byrne, senior agricultural manager, is quick to point out that with €1.2bn committed to the SME sector, a large portion of this is dedicated to farmers and agribusinesses.

The RBS-owned bank “is very interested in lending to the agricultural sector, both on farm and into the agribusinesses that support the sector”, according to Ailish.

One key trend Ailish and her team are seeing is: “Farmers are paying down debt faster, due to low interest rates.” She adds: “Farmers don’t like to be heavily borrowed, so when they have cash, they pay it down.”

Asked why, Ailish explains that farmers see debt as a barrier to expansion. For example, if 20 acres came up beside them, it would make it easier to draw down new debt in the future.

With her team of 12, working on farm and around kitchen tables makes farmers more comfortable and the bank can get a feel and better understand the needs of the business.

The demand is predominantly from dairy farmers and land purchase is the main reason farmers are talking to Ulster Bank. Loan requests range from €100,000 to €300,000 and the bank can offer terms of up to 20 years.

The bank is seeing strong demand from young, educated farmers who are returning home. Ailish says that, with the ending of the installation aid scheme, there is a gap to get these young farmers on their feet.

Offering up to €30,000 unsecured, it allows them to lease land and gives them both a start and a boost, according to Ailish.

Ulster Bank also offers a product for dairy farmers looking to expand. It allows for up to 24 months interest-only and has proven very popular. Ailish says it allows farmers to invest today and to prepare for expansion, yet recognises that there will not be additional sales for at least one year.

A typical example may be where a father is bringing a son into the business on a dairy enterprise. This might involve buying 100 acres, with buildings. The stock will come from the father. The capital requirement is to buy the land and improve the buildings and a new parlour. A long-term loan is taken out and, for the first two years, the farmer pays interest-only. This typically reduces the repayment in the first two years from €90,000 to €40,000, aiding cashflow.

The bank can also structure the payment to match cashflow. For example, if the repayment is €24,000 per annum, it is divided by seven and the repayments are made only during those main seven milk-producing months.

Another demand driver is where a farmer is converting from sucklers to dairy with the sale of sucklers used to buy dairy cows.

He/she also needs to build a parlour, calf shed or put cubicles into a shed. A typical loan request is for €250,000 and, again, the farmer can pay interest-only for up to two years.

The tillage sector, which has seen the price of grain fall almost 60% in one year, means tillage farmers are feeling the squeeze. Ailish says that one option for tillage farmers is to get a seasonal loan, which provides cash to allow them to go out and get the best deals on seed, fertilizer and chemicals.

After harvest, the season loan is paid back in full. However, this type of loan is more structured than normal merchant credit, which tends to be a more flexible arrangement.

Ailish looks for three things when assessing a farm business: three years’ financial accounts, 12 months’ bank statements and a simple, understandable plan. The most important thing Ailish says, however, is that any farmer must know their cost of production, be that cents per litre, cents per kg deadweight or cost per tonne. The bank can then work out repayment capacity.

Ailish is very confident about the future. Farmers are excellent production managers and understand key indicators like grass growth rates and feed conversion rates.

But she stresses that, as the industry moves into expansion mode, taking on more debt and understanding the financial position will be paramount to survival. She concludes that in times of extreme volatility: “It’s not about winning, it’s about being sustainable.”

Dr Ailish Byrne

Ailish joined Ulster Bank in 2003, following the completion of a PhD in the area of farm financial management, through a Teagasc Walsh Fellowship and UCD. Her research work involved studying in midwest USA for a period, presenting at international conferences and the publication of a number of papers in peer-reviewed journals. She is a qualified financial adviser and actively farms in the Carlow area, while heading up the agricultural team at Ulster Bank.