As a farmer, have you considered tailor-made agricultural finance as an alternative to paying your farm input costs up front (in cash) and therefore constraining your cash flow? Alternatively, tailor-made agricultural finance such as a seasonal credit facility will enable you to purchase your production inputs and finance the cost of these over an agreed term. Subject to the terms and conditions of the credit provider, you may agree to repayment after a few months or after harvesting the crops from your land.
Input costs may include items needed in your production process, such as seed, fertiliser, pesticides, crop insurance, feeds, and diesel. Although the cost of some other items may not necessarily be included, a seasonal credit facility will allow you to purchase essential products with the value of benefits enjoyed by the farm, but without incurring any real expenditure and offering some relief to your cash flow. For this reason it is important to individually evaluate your needs, budgets and forecasts together with a trusted credit provider in order to offer the right credit facility that is in accordance with your specific requirements. Remember that terms and conditions may vary and it is imperative to discuss and agree on these with the credit provider to whom you are submitting an application and accepting the credit from.
Different types of credit facilities that you may venture to apply for
Asset financing
Asset finance will allow you to purchase or replace any equipment or machinery needed in your day-to-day activities with flexible repayment terms.
Input financing (seasonal facility)
A seasonal facility (i.e. summer or winter crops) is used to purchase essential input materials for the land. The balance is usually repayable after the crops have been sold.
Mortgage loans
Mortgage loans are available for the financing of agricultural property.
It is important to note that more varieties of credit facilities may be available from a credit provider. You are encouraged to discuss your requirements and different credit facilities available to you with the credit provider you have in mind.
Documents required when applying for credit
Remember that in order for a credit provider to consider your specific requirements, you need to maintain and keep a record of your cash in and cash out for the duration of the season. This information, together with your financial statements, will be considered by the credit provider during the assessment of your application. It is therefore imperative that financial statements are up to date and available upon request in order to prevent any unnecessary delays with the assessment of your credit application.
It is important to plan towards achieving a profit and indicate all your income and expenses on your cash-flow forecast. It is necessary to provide cash-flow details to the credit provider for them to consider your ability to afford credit. Maintaining a cash flow will help you to plan, manage, and budget throughout the season, as it may be a long stretch until yield day.
Each credit provider will have a specific application form and credit application procedure, which are subject to specific credit policies and procedures. Ensure that you have your identity document, registration documents (applicable to your entity type) together with proof of residence available for submission with your credit application. The credit provider will in most circumstances provide specific information relating to the applicable interest rates and security conditions following the assessment of your information, the terms requested and the verification of your individual risk profile. Familiarise yourself with and understand the terms and conditions of any credit agreement you are entering into as you will be legally bound by them upon your acceptance of the contract.
Always strive to keep your credit record clean, as this may have a negative impact on your risk profile.
If you need to check your credit status, you can do so on a certified credit bureau’s website.
Keep on planting each seed of hope, and ponder the quote from Bill and Melinda Gates:
‘Investments in agriculture are the best weapons against hunger and poverty, and they have made life better for billions of people.’
Every farmer makes a difference! We appreciate each and every one of you.
TWK Agri (Pty) Ltd. is an authorised financial services and registered credit provider (NCRCP: 6849)