Summary answer (quick)

Short answer: Yes — many UK business loan lenders will factor in subsidy income (SFI/BPS) and supply contracts when assessing affordability, but how much they count depends on evidence, history and perceived stability. Regular, evidenced subsidy receipts and long-term offtake contracts can materially increase borrowing capacity; ad-hoc payments, disputed entitlements or short-term/spot sales are treated far more conservatively. Prepare clear RPA statements, accounts and signed contracts to maximise the chance they count toward serviceability. For a tailored assessment, complete a Free Eligibility Check: Get Quote Now — Free Eligibility Check.

Short answer: what lenders typically do

Most lenders evaluate whether farm income is sustainable enough to cover loan repayments. They routinely:

• Count SFI/BPS where payments are regular, historically received (usually 2–3 years) and evidenced by RPA statements and accounts.
• Apply averaging or a haircut to subsidy figures to allow for volatility or policy change risk.
• Value supply/offtake contracts that are long-term, with secure buyers and clear pricing formulas — these can increase headroom significantly.
• Treat one-off subsidies, disputed entitlements or easily-terminated contracts cautiously or exclude them from core serviceability calculations.

Need a quick check? Start Your Free Enquiry — Free Eligibility Check. Submitting an enquiry will not affect your credit score.

How lenders assess affordability for farming loans

Lenders judge affordability by asking one primary question: can the business reliably service repayments from its normal cashflow? For farms this involves additional complexity because farm income mixes trading receipts, subsidy payments and irregular capital events.

Key underwriting concepts lenders use:

• Cashflow vs gross revenue: lenders focus on net cash available to repay debt (after direct costs, drawings and tax), not headline turnover.
• Historic performance: 2–3 years of statutory accounts and management accounts are commonly reviewed to identify trends and normalised profit.
• Seasonality and volatility: seasonal peaks and troughs are stress-tested — lenders may require working capital facilities to bridge seasonal gaps.
• Stress testing: lenders often apply sensitivities (e.g. lower commodity prices, reduced subsidy levels) to see if the business still covers repayments.

Different lender types vary in approach: high-street banks are more conservative; specialist agricultural lenders and alternative lenders/brokers usually show more flexibility if you can present good evidence and robust forecasts.

Treatment of subsidy income: SFI & BPS explained

What are SFI and BPS? These are Rural Payments Agency administered support payments (such as the Basic Payment Scheme and the Sustainable Farming Incentive) that appear in farm accounts either as operating income or exceptional receipts.

How lenders commonly treat them:

• Counted where: payments are recurring, supported by RPA payment confirmations, shown consistently in accounts/tax returns over multiple years (typically 2–3 years) and have low clawback risk.
• Discounted or averaged: lenders usually average subsidy income over several years and may apply a haircut (e.g. 10–30%) to allow for policy change, entitlement transfers or potential future reductions.
• Excluded or limited: one-off grants, disputed entitlements, or payments tied to specific capital projects (not recurrent operating support) are often excluded from core affordability calculations.
• Net contribution principle: lenders prefer to see the net benefit after direct costs. Show subsidy-linked costs clearly (e.g. extra fertiliser, seasonal labour) in your management accounts.

Common documentation lenders request regarding subsidies:

• RPA payment statements / entitlement schedules
• 2–3 years’ statutory accounts and tax computations
• Management accounts / bank statements showing receipt of payments
• Cashflow forecasts showing reliance levels and sensitivities

How lenders view supply contracts & offtake agreements

Supply contracts (for example milk supply agreements, arable offtake contracts, or livestock purchaser agreements) can materially improve a lender’s view of future income because they add predictability.

Key contract features lenders look for:

• Length and stability: multi-year contracts (3+ years) are more persuasive than seasonal or annual rolling contracts.
• Pricing structure: fixed-price, index-linked or take-or-pay terms reduce downside risk; formula-based pricing needs transparent inputs.
• Buyer creditworthiness: contracts with large processors or reputable co-ops score better than small, untested buyers.
• Termination clauses: long notice periods and limited termination triggers increase lender comfort.

Lenders will typically ask for:

• Signed contracts and recent invoices showing contract performance
• Buyer references or company information on the counterparty
• Evidence of minimum volumes, take-or-pay commitments or penalty clauses for non-delivery

Where contracts are short-term or spot-based, lenders may only treat them as supporting evidence and rely instead on historical average revenue and owner experience.

Examples that illustrate lender practice

Example 1 — Dairy farm: a dairy business with a 5‑year processing contract with a national co‑operative and three years of stable RPA payments. A specialist agri lender counts most contract revenue and averages subsidies, giving the farm higher borrowing capacity.

Example 2 — Arable farm: an arable unit relying on annual spot sales and one-off grant income. Lenders apply conservative pricing scenarios and may only partially count BPS/SFI, resulting in a smaller unsecured loan but potential asset- or invoice-based alternatives.

What evidence to prepare

Presenting clear, reconciled documentation speeds decisions and boosts the chance subsidies and contracts will be accepted:

• RPA payment confirmations and entitlement paperwork (last 2–3 years)
• Statutory accounts (2–3 years) and tax computations
• Latest management accounts (month‑end) and bank statements
• Signed supply/offtake contracts, recent invoices and buyer details
• Cashflow forecast showing seasonality and stress scenarios
• Land/tenancy agreements and any evidence of embedded costs

Practical tips: reconcile subsidy receipts in management accounts (show net farm income), prepare a simple sensitivity table (e.g. -10% subsidy, -10% commodity price) and obtain buyer references if available.

If subsidies or contracts don’t meet lender tests — alternative approaches

If subsidies or contracts are insufficient to secure the loan you want, lenders and brokers often consider alternatives:

• Asset finance (machinery/tractor finance) secured on the asset
• Invoice or debtor finance if you have trade invoices
• Seasonal overdrafts or short-term working capital facilities
• Bridging loans or property-secured borrowing for established equity
• Personal guarantees or additional security to bridge a shortfall

Using a broker or specialist lender that understands agricultural risk can often unlock more flexible terms than standard corporate products.

How UK Business Loans helps

UK Business Loans connects farming businesses to specialist brokers and lenders who understand how to present subsidy income and supply contracts to underwriters. We’ll:

• Match you with lenders/brokers who handle agricultural income mixes and loans from around £10,000 upward
• Help you prepare the right documents and forecasts to strengthen affordability
• Deliver a fast, no‑obligation Free Eligibility Check so suitable partners can contact you

Get Quote Now — Free Eligibility Check

UK Business Loans is an introducer. We do not lend or provide regulated financial advice. All lenders/brokers we introduce operate under their own regulatory responsibilities. Submitting an enquiry is free and will not affect your credit score. See our privacy policy for how we use your data.

For more detail on agricultural borrowing options, see our farming loans overview at /farming-loans.

FAQs

Will my BPS/SFI count as income for a bank loan?

Often yes — if payments are recurring, evidenced by RPA statements and shown consistently in accounts. Lenders typically average subsidy income and may apply a haircut to allow for volatility.

What proof do lenders need for subsidy income?

Typical documents include RPA payment confirmations, 2–3 years’ statutory accounts, management accounts, bank statements showing receipt and reconciliations explaining how subsidies appear in profit.

Do supply contracts guarantee more borrowing?

Long-term, fixed or indexed contracts with reputable buyers generally strengthen affordability and can increase borrowing headroom. Short-term or spot arrangements are treated more conservatively.

Will enquiring affect my credit score?

No. Completing the UK Business Loans enquiry is a soft introduction and will not affect your credit score. Lenders may perform credit checks if you proceed with an application.

Can I use subsidy receipts as security?

Subsidy receipts themselves are rarely acceptable as security. Lenders prefer property, plant, stock or debtor security. Subsidies are treated as income rather than collateral.

Next steps — get a tailored assessment

Here’s what to do next: gather your last 2–3 years’ accounts, RPA statements and any signed supply contracts, then complete a short Free Eligibility Check so we can match you to the most suitable lenders and brokers.

Get Matched to Specialist Agri Lenders — Get Quote Now

We are an introducer. We do not lend or provide regulated financial advice. Submitting an enquiry is free and will not affect your credit file. Read our privacy policy for details about how we handle your data.

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