Agricultural Producers Expect Integrated Solutions from Banks

money and grain

Working capital credit lines for the financing of production cycle costs are traditionally on of the most demanded lending products for the agribusiness customers. Suggested lending terms are optimized for the agribusiness specifics, like seasonal nature and duration of the production cycle.

Natalia Porivna

Natalia Porvina, Head of Agro Business Support Department of Credit Agricole Bank 
Working cycle financing schedule is tailored to 18 months. The redemption schedule is aligned as much as possible with the inflow of revenues from agricultural products sales. Alternative financing instruments, like bills of exchange avalisation and bank guarantee, also find a ready sale. They help to reduce the cost of financing and, accordingly, raise the company’s profitability. We also see the investment financing share to increase every year. Agricultural companies actively renovate their fixes assets: by purchasing farm machinery, upgrading and enhancing storage capacities, investing in food processing as well.

Nonetheless, agricultural producers not only focus on specific banking products, but expect the banks to provide some integrated solutions which would cover all their needs.

Along with financial service of very high grade Credit Agricole Bank offers its customers the expertise and solutions which help companies to achieve the expected results. Expertise is one of the key strengths of the bank.

A team of agro experts working at the bank purposes to ensure the efficient dialog with farm producers and teach the agribusiness specifics to the bank professionals. In 2018, Credit Agricole Bank launched the Agri School project aimed at expanding expertise and deepening knowledge of specialists in the field of agribusiness.

Cooperation model of Credit Agricole Bank is the efficient dialog. Communication with the bank’s partners, market experts, the permanent monitoring of agricultural market trends, keeping track of crops condition – this information let the bank be aware of the actual state of things in the agricultural sector, respond to changes and meet the customer needs to the full extend and as quick as possible.

We are also actively involved in adopting the best practices from other countries of the Credit Agricole Group and offer our customers the banking products adopted on external markets.
Hans Broucke

Hans Brouсke, Deputy Chairman, Head of Corporate business of UKRSIBBANK BNP Paribas Group
Banks are becoming an important partner for farmers and can timely provide the necessary financing.

The working capital is the main and often the most demanding need for financing agribusiness. There can be various financing sources, for example, equity capital and trade loans in the form of deferred payments from suppliers to be made for plant protection products, seeds, fuel etc. However, it should be noted, that in general, both equity capital and trade loans could not fully cover the company needs and are often more expensive than bank financing.

Therefore, banks are becoming an important partner of farmers and can timely support them and provide the necessary funding, especially in case of the sowing campaign. Since some companies do not have enough assets to provide banking services, we offer a unique product in the market – financing the whole chain of product production from seeding up to the ultimate buyer with a provision in the form of future harvest and finished products. Working with our clients, we use the expert experience by one of the largest financial international groups BNP Paribas and our agronomists. Modern technologies, including satellite field monitoring and NDVI index analysis, allow both company management and the bank partner to receive up-to-date information about situation with crops and it allows operatively react and tackle the possible problems.

Another important aspect of financing needs is represented by investment projects of different companies. It could be split into two categories. Small and medium categories are represented by procurement of drones, equipment, the large ones – by infrastructure projects, such as the construction of elevators, the purchase of own fleet of cars or grain carts, as well as expansion of the land bank.

Vast majority of such projects are very capital intensive and have a long period of return on investment, at the same time they are necessary to ensure a high competitive position in the market and maintain a high margin of business. Not every company can handle such huge projects independently, and banks actively offer their participation with standard scheduled credit lines, as well as leasing products. We actively work in this segment and offer financing for the purchase of machinery and equipment in a convenient format for our customers.
Vitaliy Kyslenko

Vitaliy Kyslenko, director of the business development department at Industrialbank
Agrarians need loans to buy agricultural equipment and programs to replenish working capital.
In January-October 2018, as the State Statistics Service of Ukraine says, in the structure of exports from Ukraine, more than 50% accounted for agricultural products and food industry (sunflower oil, sugar and other products). And small-sized agricultural companies along with agriholdings are fighting for their share of these 50%. Year after year, small farms take and pay back loans for the purchase of equipment and financing of daily operations. Are such customers interesting to banks? They certainly are. Banks are changing their approach to lending to small agricultural companies, as evidenced by the emergence of many programs for their servicing and financing.

The government, for its part, emphasizes that this direction is strategically important to the development of the country. There are a number of state programs called to reduce the cost of financing and offer various types of compensation. Meanwhile, the state has been increasing spending to support various segments of agribusiness year after year.

The most popular among farmers are programs for the purchase of agricultural equipment and loan programs for the replenishment of working capital. In the latter case, loans are used to buy fertilizers, seeds, fuel and lubricants.

To check if a business is eligible for a loan, banks use international standards, both current indicators and those planned with regard to a financing project. The main criteria are the experience of a potential client, the applicant's own assets such as land, warehouses, machinery and other equipment. Also, for the bank to take a positive decision, it is important for an applicant to have counterparties, stable financial performance and an impeccable business reputation.

Today, medium-sized agricultural companies are the most stable clients of banks. As for farms, banks consider cattle farms' financial performance indicators to be more stable and predictable.Today, medium-sized agricultural companies are the most stable clients of banks.

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