International Loan and Financing for Agricultural Projects.
The early 21st century gave rise to a very large challenges in global agriculture the solutions to which can at times be at odds with each other. The first is to find a way to produce dramatically greater amounts of food to feed the world’s rapidly growing population. The second is that agriculture production and activity can at times cause significant negative impacts on the environment.
The development of agricultural business is supported by general trends in the global economy, including the explosive growth in demand for bulk food produced on a large scale. Economic transformation and urbanization have contributed to the transfer of agriculture to new technologies, increased economic profitability of agricultural producers and improved organization of business.
Preliminaries of agricultural business loan and lending.
The agri-food sector, which has evolved from the model of small peasant farms to the model of large agricultural holdings with huge assets and dozens of controlled companies. Agriculture at all times has been the main source of income and the most important place of work for people in rural areas. The growth of production mechanization and market mechanisms changed the situation.
Good financial decisions in this sector form the basis for effective investment projects. Increasing investment costs too quickly, without considering potential risks and financial constraints, can lead to a loss of financial liquidity, which means for some companies the path to bankruptcy.
Therefore, an agricultural enterprise should strive for sustainable, long-term development instead of achieving immediate effects at any cost. When planning investments in agricultural projects, one of the key problems is the rational choice of the capital structure to support the investment process.
Loan and Financing Model
International Loan and financing of agricultural business are consists in the correct choice of sources of funds and the formation of a capital portfolio with the most appropriate ratio of each of these sources in the overall financial structure of the project.
Below is the kind of loan and financing model for agricultural projects.
Short-term credit, defined as credit extended for 12 months or less, including preand post-harvest financing, financing of accounts receivable, and inventory financing.
Medium-term credit, defined as credit extended for 13 months through 60 months, including equipment financing and other term loans.
Long-term credit, defined as credit extended for more than 60 months, including financing for real property and other types of long-term credit. Leasing Products
Guild for Lending Source for Agricultural Projects
Lending Source for agricultural projects includes links to searchable databases offering funding opportunities from government and/or private sources that are available to local governments, community organizations, and individuals. It provides web links to full-text online guides and tips to assist grant writers prepare successful proposals. The reader may locate links to additional funding programs and information on the Rural Information Center (RIC):
The Funding Process
The process of grantsmanship covers a broad scope of activities including preliminary planning and research, proposal development, and proposal follow-up. Through this process, two questions are commonly asked by grantseekers, “Where is the money available?” and “How do I get it?” The following discussion addresses these questions and provides useful information for grantseekers in search of funding dollars.
Where Does the Money Come From?
The two primary sources of grant money are public and private funds. Public funds are obtained from governmental units, such as federal, state, and local agencies. Private funds, on the other hand, come from organizations involved in charitable giving, such as foundations, direct giving programs, voluntary agencies, and community groups.
Federal Funding
The Federal government is the largest of all the grantmakers. However, much of the federal grant budget moves to the states through formula and block grants. From there it is up to the states to decide how to use the money. The federal government administers several types of grants designed to accomplish different purposes, such as conducting scientific research, demonstrating a particular theory, or delivering services to a specific population. Examples of these grants include:
Private Funding
Private funding can be obtained from a variety of sources, such as foundations, corporations, voluntary agencies and community groups. For the most part, philanthropic organizations fund programs which either address their individual interests (e.g., farm safety) or benefit a particular group (e.g., company employees and their dependents). Examples of major types of philanthropic organizations include:
- private foundations which receive income from an individual, family or group of individuals. The funding priorities of private foundations are usually based on the personal philosophies of the founding members.
- corporate foundations which receive contributions from a profit-making entity, such as a corporation.
- community foundations involved in grant giving within a specific community or region.
- direct giving programs philanthropic arms of corporations which donate goods and services for charitable causes.
- voluntary agencies private organizations which support charitable programs that are consistent with their overall mission. The American Red Cross, for example, provides printed materials and staff consultation for health projects in various communities.
- community groups local organizations which focus on supporting projects within their communities. Examples of these organizations include churches, Junior Leagues, and civic organizations.
Agricultural factoring
Agriculture factoring is a long established farm financing method that has been used for decades. Farmers, food processors, distributors, food manufacturing companies, food packaging companies, shippers, and suppliers can all take advantage of agriculture financing.
Agriculture factoring can provide capital for your business in a few days. By purchasing your current invoices, farm factoring companies can pay you for them practically on the spot. This way, you don’t have to wait weeks or months to collect payment from your customers. Farm factoring companies charge a fee for expediting this payment process which can range from 3–8%; each account is different. (The more current the invoice, the lower the fee.)
What’s more, agriculture factoring does not rely on your credit score but on the creditworthiness of your invoices. What does that mean? That means if you supply Walmart its produce and perishables, the farm factoring company only assesses the credit of Walmart, your customer. That’s a relief to many in farming and food production.
Agricultural leasing
A agricultural land lease is an agreement between the property owner (lessor) and leasee that stipulates the terms of use for a piece of farmland. The tenancy may be either long-term or short-term, but typically lasts three to five years. A typical lease includes provisions such as rent, length of term, rental rates per acre, what types of crops are allowed on the farm (e.g., only vegetables), payment frequency (e.g., every year on January 1st), who will supply equipment and livestock (if applicable).
If you are starting up a large agricultural projects, Havelet Finance Limited is ready to finance you with 70% of your required funding amounts.
Contact US
Comments
Post a Comment