A leading farm consultant has warned farmers must make plans now to replace the loss of income, due to the phasing out of the Basic Payment Scheme (BPS) in 2021.听
With Government plans to begin cutting direct payments in England from next year despite calls for delay, Mr Haley said businesses would now need to call on alternative funding sources in order to support their enterprises.
In a funding and grants webinar organised by the RABDF, Mr Haley said: "拢79,700 is the average income on a dairy farm. But when you look at how that is made up, a significant chunk comes from the BPS and that is propping up the income."
Mr Haley explained this would require the need for farmers to enhance income from their core farming business, such as milk sales, young stock sales and culls.
Mr Haley also claimed 鈥榮tress testing' was key to monitoring the resilience of a business, which involved playing out different financial scenarios, such as the impact of any losses due to poor weather and milk price cuts.
Highlighting that an all-year round calving herd in the top 25 per cent made 12.6ppl more margin than the bottom 25 per cent, he said: "Chasing turnover is not the only way to increase profit, equal emphasis should be put on reducing costs also.
"Think margin, not yields and focus on the cost of production."
Grants听
Mr Haley urged farmers would also need to capitalise on grants as soon as possible to secure subsidy support during the transition period.
He added: "If you are planning on doing any concrete work, hedging, stonewalling and tracks, for example, then apply to do it now.
"The Countryside Stewardship (CS) Scheme can help fund these - sometimes up to 100 per cent of costs covered. Although it is a postcode lottery as to whether you are in a high priority area, do not wait five years to look when BPS payments start to drop off the cliff, as they might not be available then - take advantage now."
Business resilience advice
1) Bounce bank loans scheme听
Between 拢2,000-拢50,000 available for businesses, capped at 25 per cent of their 2019 turnover.
No capital or interest repayments needed in the first 12 months and then a low 2.5 per cent interest rate to follow.听
Mr Haley said: "If you have existing debts at a higher interest then this could be a way to reduce the sums you are paying. Or if you have capital works you are planning to do under a stewardship or productivity scheme then this Government-backed loan can give you a lump sum of money without affecting existing debt.听
"Remember though it is a loan not a grant so it will need repaying," he stressed.
2) Defer any VAT payment due until March 31,听2021
3) If you are a dairy business with holiday lets or tourism focused enterprises, then you might be able to access some of the Covid-19 grant funds offered through your Local Authority.
4) Enterprise Answers
This is a rural community funding development institution providing an alternative form of finance.
5) Self-employment income support scheme (SEISS)
Available for sole traders and members of a business partnership to qualify for.
6) Job retention scheme for employees
Limited company directors are eligible for salaries paid through PAYE but not on dividends.
7) Claim back statutory sick pay if any employees have been off ill or had to self-isolate because of Covid-19 symptoms or family members affected.
8) Ask for a capital and or interest repayment holiday on any loans you have.
9) Ask for a temporary overdraft increase.听
10) Review and restructure existing debts if possible - there has never been a better time to borrow money at a cheap rate.听
11) Ask for a repayment holiday on your hire purchase agreement.
12) Prepare cashflows and budgets to support justification for any loans and grants and stress test for future scenarios.听
13) Benchmark regularly against similar enterprises.听
14) Go back to suppliers and review costs. Try and get better payment terms.听
15) Buy-in bulk/larger volumes and stretch payments out.听
16) Work together by machinery sharing, inputs purchasing, enhanced collaboration with neighbours.听
