Self-catering enterprise Set-up in 1999 in vacant farm house Taking up to 6 people 20 week occupancy
The makeup of business profits (2005) €47,340 Total Profit Profit from farming SFP Other Premia Self- Catering €0 €10,000 €20,000 €30,000 €40,000 €50,000 Net Cash Flow = €35,000
Total Net Cash Income Single Farm Payment Net Cash Income from farming Non-farm income State Transfers Family Living Expenses Tax Balance for Reinvestment
The Balance Sheet Farm Business Debt Small O/D & stocking loans Existing self-catering project Outstanding €15,000 loan Assets valuation (2005) Land €17,000/ acre - €1.87 million Self-catering unit - €150,000 Total Owners Equity = €2 million
Business Goals Cash flow Better utilisation of available assets Planned retirement/ exit strategy
Options Look at the farming system Push the self-catering harder Use the equity available for off-farm investment Property at home or abroad OR Look at other tourism options
Making the decision! Potential identified to tap into the demand for ancillary services Supplying food – evening meals/ suppers Opportunities to sell farm & local produce Develop potential for walking trails on the farm Decision made! expand in the tourism business using a bed & breakfast to exploit the potential identified!
How this option was funded Key costs Conversion of existing farm house Tracking out the farm walks – minimum cost Total cost of conversion - €150,000 To be borrowed over 15 years @ 6.5% Annual repayment = €15,700
Borrowing for diversification Issues Identified & Discussed Affordability of repayments Net Cash Flow from new business Stress test for rising rates Using the farm as collateral Matching security to loan value Land as security –negotiate lower interest rates Limitations on future borrowing?