What is the future of farm finance in Scotland?

These changes, introduced by the Moveable Transactions (Scotland) Act 2023, include a new way of securing loans: The Statutory Pledge.

This blog post explores what this means for farmers and agricultural businesses looking to access finance in Scotland.

Why is security important when raising farm finance?

Most farming and agriculture businesses need cash to keep their operations running. Often, they get this through loans, which are repaid with interest. Lenders usually want security — an asset they can take possession of or sell if the borrower can’t meet repayments.

A typical example is a standard security (the Scottish equivalent of the English mortgage) over land and buildings. This allows the lender to take possession if repayments aren’t met. Many of us encounter this when buying a home, but it’s also common in commercial and farm lending.

Borrowers often provide as much security as possible to secure better interest rates and reduce the total cost of borrowing — as long as they can meet repayments.

How does the Statutory Pledge work for farmers in Scotland?

While standard securities are the only fixed way to secure loans against land and buildings in Scotland, what about moveable property like machinery or livestock?

Before the Moveable Transactions (Scotland) Act 2023, the main option was a pledge, which required borrowers to hand over the asset to the lender. That wasn’t practical for farming equipment like tractors that are needed on the farm, so was never used in practice.

A floating charge is another option, but it’s only available to limited companies or limited liability partnerships — structures not always used by family farms.

The new Statutory Pledge lets farmers and agricultural businesses use assets as security while keeping them in their possession.

Which farming assets qualify for a Statutory Pledge?

To grant a Statutory Pledge, the asset must —

• Be corporeal and moveable (some exceptions apply, like shares and certain financial instruments). For example, tractors, machinery, and livestock may qualify.

• Be worth over £3,000. (This could limit the use of some livestock.)

• Be fully owned by the borrower — assets on hire-purchase don’t qualify.

Once these requirements are met, the pledge is created by registering it in the Register of Statutory Pledges at Registers of Scotland. This provides transparency for lenders.

What does the Statutory Pledge mean for my farming business?

The Statutory Pledge has been available since 1 April 2025, but it’s too early to say how widely it will be adopted.

Major lenders may have concerns, especially with livestock that could die during the loan period. Machinery also depreciates faster than land or buildings, which may make lenders cautious.

However, specialist agricultural lenders may embrace the Statutory Pledge alongside traditional forms of security. This could help farming and agriculture businesses access better interest rates and more flexible financing options.

FAQs about the Statutory Pledge and farm finance in Scotland

Can I use my farm equipment as security for a loan?

Yes. The Statutory Pledge allows farmers to use tangible, moveable assets — like tractors, harvesters, and other machinery — as security without handing them over.

Can livestock be used as security under the Statutory Pledge?

Potentially, if it’s valued over £3,000 and fully owned by the borrower. However, lenders might have concerns about the risks involved.

What is the Register of Statutory Pledges?

It’s a new public register maintained by Registers of Scotland that records assets used as security under a Statutory Pledge. It increases transparency for lenders.

Does the Statutory Pledge apply to land and buildings?

No. Land and buildings are covered by the standard security in Scotland. The Statutory Pledge applies to moveable assets.

Conclusion

The Statutory Pledge is a potentially useful development in Scots law that could open new doors for financing in farming and agriculture. While its full impact remains to be seen, it’s worth discussing with your lender and legal advisers to see if it’s right for your business.

If you have any questions, please get in touch with our rural team. We’re here to help.