One of the main stay of a stable economy, is its ability to provide for its citizens. Quite a lot of developing economies such as China, Philistine, Malaysia, Japan, to mention but a few have successfully provided for its citizen via agricultural venture.
However
it takes the support of certain industries to ensure the success of a nation’s
agricultural sector. One of such industries is the financial sector.
Quiet a
number of banks are not involved in the huge financing of agricultural
business. Not necessarily because they don’t want to, but rather the
understanding of the life span of the venture is not within their corridors.
The
Central Bank of Nigeria and a few of the commercial banks have programmes that
support agricultural schemes, yet this is a far cry from developing the sector.
Below are some of the few reasons why the banks often shy away from the
venture.
1.
Life Span of the business: The
life span of most agricultural venture takes long time to recuperate the
initial investment, and most banks may not have the luxury of waiting that
long. Every business has got associated risks attached to it, so is
agriculture. Some of these financial institutions do not have the appropriate
risk mechanism to ascertain the level of exposure of the risk venture, as a
result accessing financial loans may be impaired.
Animal
husbandry or crop propagation all take a long time to get the cash flow
balanced, coupled with the fluctuating weather conditions. A lot of technical
issues are left unanswered and these are some of the factors the banks looks
at.
2.
Improper business plan: It is important to have a well written
business proposal before accessing that loan desired. The plan needs to spell
out every detail that is important to the success and failure of the business.
The risk factors have to be spelt out to the letter, indicating the Strength,
weakness, opportunities and threats of the business. A business plan without
these indicators is like car with faulty dash boards. The banks want to see the
risk involved in the business and the steps you would take to mitigate against
these perceived risks.
Never
try to impress with your business plan by stating only the benefits and profits
that may accrue. Every business has got its risks. On assumption that there is
no risk in your agric venture, just shows that you are not ready for any
financial lease and the proposal would definitely be thrown out or flushed.
3.
Cash flow statement: Every sector has got
its professional jargons. You need to speak in the language the banks
understand. The business proposal should clearly state how the cash would be
disbursed into various sector of the business. Just showing that the fund would
be used to purchase assets and liabilities for the agric business is not
enough. There has to be a clear flow of where, when and how it would be shared.
The basic salaries of workers, purchase of items(assets and liabilities),
proposed cost and selling price, gross income, taxes where applicable etc and
most importantly how you intend to pay back the funds and in what manner.
The
statement must be done professionally and well tabulated. Make the figures
talk, that’s what matters and not how fulfilling the business may seem to you.
It’s all about their money and how you intend to pay back feasible. Understand
this and you are half way through.
