Loyalty to your lender could be an expensive mistake

In August 2016, the Competition and Markets Authority (CMA) reported that 90% of small businesses get their loans from their main bank, with little or no shopping around for other lenders.

In its analysis of the shortcomings of competition in the retail and small business markets, the CMA reported that it is hard for businesses to find out who is the best lender and if they are getting good value from their existing bank.

Loyalty and time prevent shopping around

This applies to the farming and rural market as much as it does to the small business banking market. Many farm businesses in the UK have probably been with their banks for a long time. If you were to ask if they had looked at other banks and mortgage providers over the last few years, many would probably say no. But it can be expensive to assume that your bank is the cheapest or offering the best deal.

Loyalty to the brand and sometimes to the bank relationship manager, if the bank hasn’t streamlined the farm business into a direct telephone bank service, plays a big part in the farming market.

Time is another factor. It can be time consuming looking at the whole market, particularly for fledging businesses which may not meet high street bank criteria yet, but could suit the many of the growing number of alternative lenders in the market.

Even though your day-to-day banking is with one bank, it doesn’t mean that your bank will offer you the most suitable terms for lending. There is no reason why all financial arrangements need to be kept in one place even if your bank does try to persuade you to.

Do farmers really know if they are getting the most suitable offers?

But, despite these factors, do farmers really know if they are getting the most suitable lending deal from their existing bank or from the lender they have always borrowed from? Have they ever compared rates, terms and conditions against other potential lenders? For new lending, how many farmers shop around and how many stick with what or who they know and like?

With the future of the industry uncertain as Brexit negotiations begin, farms need to be in a strong financial position and be as flexible as possible to adapt to any changes that may come their way. We strongly suggest exploring all existing and potential finance arrangements to check you are on the best deal for your needs. You may end up saving money or being in a more flexible cash position.

For example, we have recently saved a client around 0.5% on his borrowing by looking at other lenders. In another case we have saved the client in the region of £20,000 by minimising the number of visits from a quantity surveyor to satisfy bank stages visits on a farm development proposition. We also have a good record of turning around declines from a bank into acceptances from the same bank or from other lenders. 

How can you get help to find the most suitable deals?

We are mortgage experts with strong relationships with the high street banks, agricultural lender, high net worth lenders and alternative lenders. In total, we work with over 30 lenders. We have over 150 years of experience in the banking and farming industries in the team.

We’ll know if your bank lending offer or current deal is the best fit for your needs, and we’ll know if we can get you a deal that is better for you. We prepare lending proposals and requirements for all lenders so they all have the same detailed information and it’s easy for them to make quick decisions. It also makes it easier for you to compare the rates, fees and terms in any mortgage offers.

We aren’t tied to any provider on a commission basis and only find the mortgages and the lender that gives you the best outcomes. Being regulated by the Financial Conduct Authority (FCA), we always act with your best interests in mind.