Project finance is widely used in the context of the development of large agricultural projects, such as the expansion of cultivated areas, the introduction of new crops, the construction of large facilities for the processing and storage of agricultural products, the modernization and Financing for Large agricultural Projects and mechanizations.
Viola Funding Limited provides loans and financing for large agricultural projects and promotes the attraction of long-term financing, and The attractions long-term capital opens up great opportunities for agricultural projects finance that require significant resources at the early stages.
the development of dairy farming, grain farming, mixed farming, processing of agricultural products, food industry facilities and other businesses. Contact our consultants to learn about our financing options for your project.
Financing of agri-business; our service
One of the main tasks of managing an agricultural project against the background of globalization is the organization of its financing abroad, which includes providing the project with all types of investment resources, including long-term funds, fixed and circulating assets, know-how and other intangible assets, land use rights, etc. However, the biggest problem of large investment projects is the accumulation of significant financial resources, especially in the early stages.
Countries as USA, India, Brazil, France, Indonesia, Mexico, Turkey, Argentina, Germany, Poland, Australia and Canada offer favorable conditions for investing in agricultural projects of various types. Available sources of long-term financing, which today is a scarce resource at the national and international level, is a key factor in the success of such projects.
The main factors of successful financing of agricultural projects abroad are listed below:
• Development of the project should receive the support of the host country, including tax benefits, subsidies and others.
• The pace of attracting investment should correspond to the project development schedule in accordance with the timeline and financial constraints.
• Reduction of costs and risks of the project should be ensured by creating an appropriate structure and sources of long-term financing.
The role of financing in the development of agricultural business
The main sources of financing for agricultural projects include internal financial resources of the enterprise, additional emission and placement of shares, issue of bonds, attraction of financial resources of local investment companies and foreign funds, bank loans, targeted loans from the state, support from international financial institutions.
Over decades, project finance has been used primarily as a way to form a consortium of investors, lenders, and other participants who commit themselves to developing project infrastructure that is too costly for a single company or entrepreneur. This mainly concerned the most expensive projects, such as mines, factories, seaports, roads, pipelines, and so on.
The main international financial institutions that use project finance in their practice include World Bank Group (International Bank for Reconstruction and Development, International Finance Corporation, Multilateral Investment Guarantee Agency) and European Bank for Reconstruction and Development and regional development banks (Inter-American Development Bank, African Development Bank, Asian Development Bank, etc.). Some methods of project finance are widely used by the IFC as an institution of the World Bank Group established in 1956.
Agricultural Finance structure and participants
Financing is applicable for projects worth several tens of millions of euros or more. This is easily explained by the fact that the organization of project finance requires significant costs, effort and time, which makes this mechanism quite expensive. For small business projects, traditional lending instruments seem much more appropriate. In recent years, the role of project finance in agriculture has increased as the scale of the agricultural business and the cost of projects in many niches continues to grow, requiring new financial models and solutions to meet current business needs. This is especially true for large international agricultural projects organized by multinational companies.
Commercial banks for agricultural financing
Banks represent the initial source of capital for project finance on the market. To negotiate large long-term loans, banks often form syndicates to jointly finance capital-intensive and risky projects. The creation of a syndicate is important not only for attracting more capital, but also for de facto political insurance. In addition to commercial banks, many other financial institutions are involved in agricultural financing.
In addition to commercial banks, many other financial institutions are involved in agricultural financing.
Agricultural project finance mechanisms
The main feature of project finance is the use of a wide range of sources, funds and methods of financing agricultural projects, including long-term loans, bridge loans, share issuance, equity contributions, placement of bonds, financial leasing, etc. State funds can also be used, sometimes in the form of loans and subsidies, as well as guarantees and tax benefits. There is a special term “financial engineering”, which means the activity of building schemes and models that are optimal from the point of view of combining profitability and reliability.
Financing of large agricultural projects can occur in the following ways:
• Financing by one large funder, which is the simplest form of project finance.
• Independent parallel financing, in which each funder enters into a separate agreement with a special purpose vehicle and is responsible for the separate part of the investment project.
• Project co-financing, in which several lenders form a single pool (syndicate or consortium), concluding a single loan agreement with the borrower.
If you need long-term financing for a large agricultural project, contact Viola Funding Limited
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