Farms finance the development of their production mainly with their own resources, ie revenues and state incentives (subsidies), and loans for agricultural promotion are always welcome.
However, in the absence of own funds, the expectation, from the submission of an application for an incentive to the payment of the incentive itself, may present a financial problem in maintaining the current liquidity of agricultural holdings.
No more buying raw materials by arranging payment deferrals until incentive payout.
For this reason, commercial banks have recognized the needs of agricultural holdings and introduced in their offers an affordable and affordable way of short-term financing for the development of agricultural production. These are loans that are granted on the basis of realized entitlements to incentives in agriculture.
Accordingly, the beneficiaries of the loan may be all agricultural holdings, crafts or enterprises engaged in any of the agricultural activities and are beneficiaries of state incentives in agriculture. It is important that all legal preconditions for exercising the right to an incentive were fulfilled before the loan application was submitted, that a unique application for an incentive was submitted and that the beneficiary was still in the system of state incentives for agriculture.
Pay for the raw material in cash and take advantage of rebates, lower prices and more favorable terms.
The maximum loan amount is determined by the amount of incentives paid for the previous year and the request for the current year, but cannot exceed 80% of the approved incentives. Loans of up to $ 30,000 are approved with the basic security instruments : promissory note and promissory note. An insurance instrument for amounts in excess of $ 30,000 is a mortgage, but some other insurance instruments may also be offered.
As it is a short-term form of financing, the loan repayment period is up to 18 months. The total amount of the repayment loan comes on a one-off basis, while the interest on the loan is paid quarterly through a standing order. The Borrower has the choice of whether to repay the loan early from its own funds or entirely from the incentives received.
The interest rate is variable and stands at 7.49%. There is no administrative fee for processing the loan if the loan beneficiary has a contracted giro account package, but if there is no one, the fee is 1%.
The credit can be realized by companies, crafts and farms that duly settle their existing credit obligations and have no arrears to the tax administration.
Benefits of loans for beneficiaries of agricultural incentives
As with all forms of borrowing, paying interest on a loan is a cost. However, if you add up all the benefits of borrowing with this loan, the result is significant savings in your business.
So far, you have most often obtained from the supplier the necessary raw material, by arranging payment by way of compensation with your manufactured goods, or by arranging a payment delay until the payment of the incentive.
Delayed purchases imply additional interest on the base price, and the price of the purchased material is higher and less favorable than the current market price. Because when you buy for cash, except that you are not charged extra, you are usually offered cash rebates.
Since you have undertaken to supply the manufactured goods supplier with your manufactured goods and thus compensate the debt for the purchased raw materials, it is the supplier who determines and sets the purchase price of your goods. Most often, the purchase price offered by the supplier is much less than what you could achieve by selling on the open market.