It may be that you do not need to borrow any money to start up your business. However, many new businesses do need to raise money to cover:
- the initial start up costs such as the cost of the property, the cost of converting the property and so on
- livestock and livestock housing units
- equipment, vehicles
- working capital
It is very likely that there will be a period where your organic farm is yet to generate a significant amount of sales income (when you are waiting for your first harvest or your animals to reach market weight for the first time). During this period you will still have to cover expenses such as:
- your own living expenses plus any wages/contractors' charges
- feed and veterinary costs
- utilities such as heat, light and telephone
- vehicle costs
Because your income from your new business may not be enough to cover these outgoings during the early days, you will probably need to set aside some cash, or 'working capital', to tide you over
If you need to approach the bank for a loan to cover your start up costs and working capital, leave this entry in the cash flow empty until you have completed the rest. This will give you an idea of the shortfall between income and expenditure.
There are many lenders who specialise in serving the agricultural community and who tailor their loans to suit the requirements of their clients. For example, some offer flexible loans to help cope with changing requirements for working capital.
If your figures show that you're likely to need to borrow money, it's wise to check at an early stage in your planning that funds are available on terms that are acceptable to you.
Grants and other funding
Organic farming is encouraged by the Countryside Stewardship scheme and equivalents in Scotland, Wales and Northern Ireland, which offer payments to existing organic farmers as well as payments for conversion of conventionally farmed land to organic production. More information about the schemes can be obtained from:
- the Department for Environment, Food and Rural Affairs (DEFRA)
- the Department of Agriculture, Environment and Rural Affairs in Northern Ireland
- the Scottish Government Rural Affairs and Environment Department
- the Welsh Government
You can get information on grant aid and other types of funding available throughout the UK from the business finance and support finder tool on the Gov.uk website.