How to get the right financing for your business

Access to affordable financing is critical to farmers' success. However, the selection of various lending options can be overwhelming for those who are not familiar with this field. To clarify these issues and to give farmers a better understanding of the types of loans suitable for their businesses, we spoke with Irina Cruc, director of the Mikro Kapital branch in Balti, Moldova.

What are the main types of loans available for farmers offered by Mikro Kapital Moldova?

Mikro Kapital offers several products for farmers that differ from each other according to the amount, purposes, terms for which they can be granted. We have secured and unsecured loans of up to 1 million lei. We also have products for Agrotehnica through partners with a triple contract.

Starting from 2023, we also work with the Organization for the Development of Entrepreneurship, where we have up to 50% guarantee from them. Our portfolio is so diversified that we also have products for smaller farmers who have greenhouses, grow vegetables, raise animals. All our credit offers are accessed according to the needs of farmers.

How does the size and type of agricultural business influence the choice of credit type?

The type and size of the business most directly influences the client's need for financing and the Mikro Kapital product he will choose. E.g:

A beekeeping business may require financing the purchase of a truck with a trailer to transport the hives or beekeeping equipment, hives, frames and bee colonies may need to be purchased; A business in the animal husbandry sector would need financing for the purchase of a tractor with a loader, at least equipment for growing food, a milking line for increasing the number of animals, diversifying breeds, etc. A farmer who grows vegetables would need to finance irrigation systems, greenhouse complexes, tractors, transport. Businesses based on cereal crops, which are practically the largest, could opt for credit for the purchase of combines, tractors, the construction of warehouses. Thus, these needs differentiate the choice of the type of credit. If a small amount is chosen, it will be included in the Rapid product, the technique in the Agro product for machinery, and where a large amount is required and the client does not have a sufficient pledge, he will be able to access it through the ODA guarantee up to 50 % of the financing amount.

What factors should farmers consider when choosing between available credit options?

The farmer must estimate his own ability to pay and draw attention to the amount he pays monthly or per season. These are the most important factors that could influence farmers.

Mikro Kapital by diversifying its products and through experts will help clients in choosing the right credit they need.

What are the main advantages and disadvantages of short-term and long-term loans for farmers?

Mikro Kapital offers its clients both short-term and long-term loans. We have our experts who provide the necessary help to the customers in choosing the suitable period for them.

Depending on the purpose for which the financing is accessed, if we are talking about a working capital loan then it is not profitable to take it in the long term. Whereas, if we are talking about the procurement of high-performance equipment or the construction of an agricultural warehouse, a longer term allows the farmer to more easily manage his financial means, in parallel with the investment.

What financial implications should be considered before applying for a loan?

For each client, the most favorable option is the proportion of the personal contribution. The higher it is, the lower the need for external financing will be, and the degree of indebtedness will be lower.

Mikro Kapital offers through its products financing for the entire necessary amount, including for various purposes such as: the purchase of aggregates necessary for an existing tractor or vice versa, the expansion of land, the increase of herds, the installation or modernization of the irrigation system, or the procurement of diesel in the season, in depending on the specifics of the agricultural branch of the respective business. Our range of products also allows us to finance the full amount of the customer's need.

How can farmers optimize their chances of being approved for a loan?

Obtaining a loan is significantly facilitated by a solid credit reputation, proper financial management of the business and a thorough assessment of the ability to pay. Many times, entrepreneurs who apply for a loan for the first time experience emotions or fear related to approval. However, Mikro Kapital is always there to help customers by providing them with the necessary information and maximum support.

I strongly encourage interested people not to hesitate to contact us, and we, in turn, guarantee that they will receive the necessary advice and support for every question or concern.

What documents and information should farmers prepare before applying for a loan?

At Mikro Kapital, the loan application requires a minimum set of documents, and most clients have no difficulty in collecting them, as these documents are essential for their business. Among them are the incorporation documents, the financial reports presented to the Tax Service, documents confirming ownership, such as certificates from the town hall attesting to the surface of the land or the number of livestock, or the record of bee families.

Our experts are always available to help clients obtain the necessary information, thus facilitating the process and speeding up the evaluation of the application.

How can farmers optimize their costs and maximize their profitability by using credit wisely?

When the farmer uses the credits in accordance with the requested destination, it is guaranteed that the investment will bring him only benefits and contribute to increasing the profitability of his agricultural business. Through the responsible use of borrowed funds, the farmer can optimize his resources and develop his farming operations efficiently, which can lead to increased production, improved product quality and reduced costs. Thus, by carefully managing loans and investing them appropriately in activities that support business growth, the farmer can ensure a sustainable and prosperous future for his farm.

What precautions should be taken to avoid over-indebtedness and repayment problems?

The agricultural entrepreneur can assess his own ability to pay and prioritize the necessary investments to avoid over-indebtedness and repayment problems.

Through this collaborative process, sound financial management and efficient use of resources is ensured, contributing to the long-term success of the agricultural business.

Mikro Kapital's expert team always provides support and advice to clients, helping them identify their financing needs and minimize the risk of over-indebtedness or repayment difficulties. In addition, we are always available to customers and offer them the option to defer payment twice, each for an additional period of 30 days.

How can agricultural lending contribute to the growth and sustainable development of agricultural business?

Through our lending services, Mikro Kapital provides farmers with a fast and advantageous source of financing, allowing them to expand and modernize their businesses by investing in modernization, expansion and automation of processes. This approach directly results in increased business and their profitability.

With over 10 years of experience and a team of professionals with extensive expertise, Mikro Kapital is always with its clients, offering them the support and information necessary to quickly and efficiently access financing sources through lending. With 11 branches in 3 regions of our Republic - South, North and Center - we are ready to serve the financial needs of farmers throughout the country.