Sowing without problems. How to get financing without overpayments

Where to get financing for seeds, fertilizers and remedies - this issue the farmers begin to work out long before the first spring thaw. This year, by the beginning of the season, Raiffeisen Bank Aval has prepared a number of decisions. One of them, as comfortable as possible, is bill financing at 1% per annum. With the help of bills, companies and farmers can purchase seed, fertilizers, plant protection products - and even irrigation equipment!

The agricultural entrepreneur has several options to get the necessary resources for sowing. The first - at your own expense, if they are enough for all the projected expenses for the season, including peak ones - for fuel and fuel and lubricants. The second is to purchase seeds, plant protection products, equipment for credit funds. This is the classic way, although loan rates are palpable and will affect the cost of grown produce. The third is also common: take an installment plan or a commodity loan from a supplier or distributor. But here there are some nuances: pegging to the currency exchange rate (while reducing its value does not give any preferences to the farmer), stringent contract terms, terms, and again - interest rates in the region of 16-24% per annum in foreign currency. Such conditions are motivated by the fact that the personal loans of suppliers are not secured by any financial institution, have no guarantees, except for the reputation of the borrowing company. That is, they refer to risky ones.

Or you can - pay for the above resources with a bill of exchange. Today, a bill of exchange is the most convenient and cheapest market instrument for financing seed crops. If we talk about the new Raiffeisen Bank Aval program, from this year the payment for the service is only 1% of the nominal value of the bill (that is, the amount for which the purchase is made). At the same time, the deferred payment period is 6-9 months. “In synergy with suppliers, we have reduced the cost of the product, allowing us to finance the needs of the agrarian without essentially changing the final cost of the purchased products,” says Nikolai Volkov, Head of Corporate Projects and Partnerships at Raiffeisen Bank Aval Aval. - At the moment, no other bank in Ukraine has programs with such a low rate. Our Bank holds a unique offer in this product. The average market value of a bill is 2.5 - 3.0% of the amount of the bill.”

The cost of financing has decreased, but the choice of partners has expanded. Now entrepreneurs can purchase seed, for example, from Monsanto and Ukravit, plant protection products from BAYER, Corteva and Ukravit, mineral fertilizers from Terra Tarsa and irrigation equipment from the Ukrainian manufacturer Irrigator. Each company offers a fairly wide range of products, which is enough to cover all the needs for sowing. Manufacturers are interested in such a financial product no less, as they gain confidence in payment.

A bill of exchange is a targeted commodity loan for the purchase of products from a particular supplier. In fact, this is installment payment for a period of 6, 9, 12 months, guaranteed by the bank, with a cost of 1%.

To receive financing, the agrarian needs to come to the bank with the intention of obtaining financing. There are no special requirements for applicants, except for standard ones - experience of at least two seasons and the absence of a bad credit history. “Credit lines, other products and the provision of a bill go through the same decision-making process. We always give the client a choice. We offer him a limit, and he already decides whether to choose it with credit funds, bills, or a combination of these products. But at the decision-making stage "yes-no" there is a nuance. Bank policy on bills is softer, it is less risky. The reason is for seven years of working with this product, with large amounts, there are no default cases. That is, there are no precedents when the client did not pay for obligations. Therefore, in practice, there are cases when a bank cannot offer a loan product to a borrower, especially a long-term one, but the opportunity to receive a bill remains. Or it determines a limit less than the needs of the farmer, and the rest is proposed to be covered by the bill program.”

Having received the limit of potential opportunities, the agricultural producer selects the necessary seeds or agrochemicals from partners, writes out an invoice for them and comes to the bank for the second time. For example, with an invoice for the purchase of plant protection products from Ukravit in the amount of 80 thousand UAH. For this amount, a bill of exchange is issued to the supplier, in which the final settlement date is indicated and a bank seal is placed, aval. Aval means that if the entrepreneur does not settle accounts with the supplier, the bank will pay instead on the specified date. On the spot, the entrepreneur pays 1% of the amount - 800 UAH immediately. The bill of exchange is returned to the supplier and after six months, for example, is calculated with him according to the amount of the transaction.

With some partners - Singenta, Monsanto - the scheme is slightly different. Since they work exclusively through distributors, the client transfers the bill to the distributor, the distributor to the manufacturing company. Because the bank guarantees are addressed directly to the manufacturer and payment from the client is sent to him.

“There is another big advantage in using promissory notes from Raiffeisen Bank Aval. The bank has a good reputation, they trust our expertise, and this provides additional loyalty from the supplier. The system for checking business structures is so fundamental that we are trusted in the market. If the bank gives the client a loan, for example, for 1 million UAH, then the suppliers of the goods boldly add another 10-15% of this amount of the commodity loan. If the distributor sees a bill of exchange from our bank, he often offers a commodity loan from himself, ”Nikolai Volkov describes additional opportunities.

Of the innovations of the bill-2020 program, there is the opportunity to purchase Irrigator irrigation equipment using this tool. Prior to this season, machinery with bills was not sold at all.

“We understand that climate change is taking place, constant droughts hit hard on the yield of our customers, some regions are particularly affected by this problem. The issue of irrigation comes to one of the first positions in the struggle for the crop. Therefore, we are starting to initiate more loyal irrigation equipment programs. And the first company to adopt this scheme is Irrigator. I think others will be added to her next season, ”the interlocutor comments on the need for a new product.

Nikolay Volkov summarizes: “Last year, we funded bills of exchange with 2.9 billion UAH. Our bank's share in the bills market is 60-70%. This tool is very convenient not only for agricultural companies, but also for small farms and farmers. Their share is 11% in total, but in the number of completed applications - many times more. The reach of this audience in 2020 will increase, because it really helps out. Already now our bill portfolio as of the end of February is 2 times higher than last year. Use new financial instruments, be convinced of ease of access to them - and let the year be fruitful, and your business - high-margin! ”