WITH a lifespan that’s typically measured in decades, or even centuries, trees outlive governments, as well as political and economic crises.
Yet the flipside is they continue to grow – and continue to need maintenance – in both good economic times and bad.
As a result, the forestry sector is one which faces a unique set of challenges during the current Brexit uncertainty, with robust demand but stiff competition as well as rising cost pressures. The industry is responding in kind by innovating and introducing more environmentally friendly machinery and equipment.
Against that backdrop, new entrants are fighting hard for market share and existing companies are under constant pressure to keep up with their rivals.
However, the challenges are stark. Official ONS data shows output in the agricultural, forestry and fishing sector as a whole fell by 1.8 per cent in Q1 2019, and ambitious forestry firms can struggle to access the finance they need to grow. The forestry sector tends to be almost completely overlooked by high-street lenders, making it harder for the industry’s smaller players to fund their growth plans.
This lack of interest among conventional lenders has prompted a number of specialist lenders to emerge, who tend to be more flexible and have products specifically tailored to the needs of the forestry sector.
As well as a deeper understanding of the sector and the equipment involved, specialist lenders like Arkle Finance typically offer finance from £5,000 to £500,000 (and beyond, where applicable), which is secured against the equipment, across fixed-term leases, operating leases or the more traditional hire purchase – all of which can be tailored to the equipment.
Having access to such a wide range of finance options can provide useful flexibility for small and medium-sized forestry businesses which can face sudden and unexpected capital expenditure requirements.
Coupled with the right advice, having the right finance can smooth out financial peaks and troughs and assist in accurate forward budgeting (something that all good forestry businesses should have in place). Once the borrower has selected the equipment they want to purchase and agreed a price, they will need to show the lender key information about the equipment as part of their loan application.
This will typically include the planned use of the equipment, preferred repayment strategy (how the borrower plans to pay off the loan in full), as well as supporting company and/or personal financial information.
Any ambitious business in the forestry sector should keep a range of funding options in its locker, as they provide for managed growth across the business by aligning the cost of acquisition to the usage and revenue-earning potential of the equipment, paying down the commitment through small, affordable, monthly repayments.
Specialist forestry finance can be tailored to the borrower’s funding requirements. While some businesses may prefer to own the equipment outright through hire purchase, others may prefer a fixed-term lease, enabling them to use the machinery without ownership in exchange for a number of monthly payments.
One major benefit of a fixed-term lease is that the borrower isn’t required to pay VAT up front and the majority of transactions require a much smaller deposit than a hire purchase. This enables businesses to better manage their cash flow, with VAT collected with the monthly rental amounts, which in many cases tend to be lower than the repayments under a hire purchase agreement.
Forestry finance is crucial for any business in the forestry sector looking to expand its horizons and grow its bottom line in the current climate.
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