Dealing with agricultural debts in the current climate

How can agricultural businesses, with their focus on long-term relationships, manage debts in the current economic climate?

19 August 2016

Agriculture is a long-term business and most people within the sector are proud of its reputation for straight talking and fair dealing. Debt issues can arise at any stage, but there are particular cyclical problems at the moment which mean that there is more debt-chasing activity, as cashflow pressures intensify.

Relationships between trading partners are built up over a long time and many are understandably reluctant to take hostile action to recover what may add up to large amounts being due. There are a host of ways in which debts can be pursued but what we tend to see in this sector is that communicating with a debtor is paramount. The aim is to obtain either immediate payment or an agreed time to pay, in an effort to avoid formal action. A debtor who is still trading will often do what they can to avoid formal action, so more often than not an agreement can be reached.

This approach often appeals to creditors in this sector, as it gives the debtor the opportunity to make good on what they say they will do. If it works, all well and good. If not, then the other side of being an understanding creditor is to take a reality check of whether there is a realistic prospect of payment by agreement. If there is no real prospect then formal recovery action may be the only option open to the creditor to protect its own position. It can be a small comfort to all concerned but at least both sides will know that a real effort has been made to avoid that outcome.

This article was written by Amanda Vaughan.

Key contact

Kevin Kennedy

Kevin Kennedy Partner

  • Agricultural Disputes
  • Trust and Probate Disputes
  • Estates and Land

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