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 outbuildings and so on
- equipment, vehicles, livestock, seed and seedlings, business stationery
- working capital
There will almost certainly be a period during the first few months of operating as a smallholder that your business is becoming known to customers and you are waiting for some produce to sell. Bear in mind that almost all agricultural commodities take a certain amount of time before they can be sold and during this period they will not be earning you any money.
During this period you will still have to cover expenses such as:
- your own living expenses plus any wages/contractors' charges
- livestock bills. This includes the initial purchase of the animals plus 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 your spouse or partner intends to keep working at an existing job during the early period of your business and you intend to cover costs using money from this source, you should include it in your cash flow forecast.
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.
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
You may be able to get some help in the form of a grant, for example to cover the cost of training for an agricultural qualification, environmental improvement, organic conversion and so on.
Information on grants for the agriculture sector is available from:
- the Department for Environment, Food and Rural Affairs (DEFRA) in England
- the Department of Agriculture, Environment and Rural Affairs in Northern Ireland
- the Scottish Government Rural Affairs and Environment Department in Scotland
- the Welsh Government
The grants vary around the country and depend to a certain extent on individual circumstances as well as location.
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.