When grower John Downes’ boiler went up in flames last year, he badly needed a replacement to heat his 14 hectares (34 acres) of glasshouses so he could continue to produce strawberries and raspberries for the UK’s major supermarkets.
With an annual energy consumption of more than 4,000MW hours, John was not only wanting to cut his energy bills, but also generate additional income through the Government’s Renewable Heat Incentive (RHI) scheme.
But this meant a £250,000 investment for the boiler and accompanying insulation.
John says: “Paying for all of it ourselves would have hindered our cashflow and our buffer for the business would have been gone.”
Rather than do this, a broker put the Somerset business in touch with Shawbrook Bank, which was able to loan John £100,000 over five years.
This helped finance a 1MW wood pellet biomass boiler, double the size of his last one. It produces enough energy to heat a 225,000-litre water reserve, so there is always a back-up.
His heating costs have reduced from about £130,000 annually to £40,000 and he also has the benefit of the RHI, generating about £110,000- £120,000 per year.
As a tenant, John says he does not think many High Street lenders would have leant to him, but he says Shawbrook was prepared to look at his business as a whole, using detailed business plans and projections he supplied.
He says: “Shawbrook looked at it from a more practical perspective. Charlotte Davies [head of renewable energy and agriculture at Shawbrook Bank] was very precise in what she was looking for because she comes from an agricultural background.
“She wanted to build a long-term relationship, so asked about every aspect of our business.
“The beauty is that with Charlotte and her team having agricultural expertise, they understand what the core of our business is about, so the questions are very specific to our business. I do not have to spend time explaining what a strawberry growing business does, for example.”
As a tenant without large assets to borrow against, John says getting buy-in from his landlord was important.
John has a good relationship with him, so was able to secure an agreement which allows Shawbrook Bank the right to access the land and business. This gives them a level of assurance, he says.
With the relationship between Shawbrook Bank and himself established, John has been able to take out an additional loan to help invest in a new growing system for his strawberries. He is also talking to the bank about expansion.
John says: “Charlotte came out and visited our nurseries and asked what our expansion plans were.
“We explained we wanted to open a packhouse and she said she would be interested in looking at this with us.”
With good business management, it is possible to diversify and secure finance if you are a tenant with smaller assets, he concludes.
“We continuously have up-to-date business plans and projections for our business. I know that can be daunting for some people, but if you are wanting to apply for a loan in six to 12 months’ time, the first thing to do is get your business plan and cashflow together. Once you can show that, lenders will look at you.
“Ultimately, they want a realistic business plan with strong figures to back it up.”
CHARLOTTE DAVIES Head of renewable energy and agriculture at Shawbrook Bank
“IF you are a tenant farmer and want to diversify your business, you might find funding for new kit and equipment hard to come by.
“Working with a specialist funder, such as Shawbrook Bank, however, there are ways to finance
new equipment [like John’s biomass boiler], even when you do not own the land it is on.
“It is all about collaboration between you, your landlord and the lender.”