How Factoring for Farmers Benefit the Agriculture SectorMost bankers are not too fond of financing farmers due to different reasons. Banks see agriculture as a very risky sector to support because of the long production cycles. A farmer also has to wait for months to get paid for his produce. Worse, a poor harvest can virtually wipe out a farmerís bottom line. Itís a sad reality that despite the importance of the agriculture sector to the US economy, those who are involved in this sector are the ones who have difficulties accessing formal sources of credit.
Factoring for Farmers
It is a good thing that financial institutions have factoring facilities that they can extend to a farmer in need of funding assistance. Factoring account serves as a line of credit that provides cash to any farmer who needs money to pay for workers, purchase feed and supplies and upgrade equipment. Unlike a traditional bank loan wherein the creditworthiness of a farmer is measured to determine whether he is qualified for the grant, a factoring facility is granted solely on the basis of the creditworthiness of the farmerís clients.
The amount that a farmer may get from a factoring facility may vary, but most lenders will advance up to 80% of the estimated value of the receivables upfront. The balance minus a minimal service charge is then remitted to the farmer after the customer pays up. Thus a farmer wonít have to worry about offering collateral or presenting financial statements when applying for a factoring facility. He only needs to show invoices and prove that his clients are creditworthy enough for the factoring lender to approve his application.
Benefits of Factoring
Instant access to funding is the chief benefit of factoring for farmers. Factoring lenders are able to advance cash to a farmer who in turn may use the money for growing his business. The farmer may do so by acquiring new farming equipment, buying fertilizers, and paying of taxes. The cultivator may even use the cash to tide him over the Ďrainy daysí or until the next harvest season sets in.
Apart from the quick access to funding, a factoring facility enables a farmer to divert his attention from cash flow. Farming is a capital-intensive venture. Anyone who is engaged in this business will be needing money regularly to pay for various operational expenses. This could pose a lot of headaches to any farmer. But a planter who has been granted a factoring line wonít have to worry about cash flow, and instead focus his time and energy on his business.
Factoring lenders can also do the invoice collections in behalf of the farmer. This further lightens the load of an agriculturalist who no longer has to collect payments from his customer. The farmer can then concentrate on what he does best- farming.
Farmers have a lot to gain from applying for a factoring line. Dealing with a reputable factoring firm like Neebo Capital can give them the best rates and terms. Neebo Capital offers low rates that start at 0.59% up to 1.5% for 30 days. It can also advance up to $10 million to a farmer who can show invoices to customers who have proven credit records. Contact us today and learn how to gain access to factoring financing easily.
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Rates at 0.59% - 1.5% for 30 days
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General Articles about Accounts Receivable Financing and Factoring:
» 08/01/2012 Debt Financing or Off Balance Sheet Financing?
» 09/15/2011 What to know when selecting a Factoring Company
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