Seasonal financing for a profitable farming business (III)


The Company was founded in 2010 and is part of a group of 5 related grain farming companies. The Company grows crops and sells the harvest to the largest grain wholesalers and exporters. Together with related entities, the Company manages 5,500ha of agricultural land out of which 1,915ha is owned by the group. The Company also has grain pretreatment and warehouse facilities to sort, dry, and store grain as well as all the necessary machinery to process the land.

From the last year's harvest, the Company has sold 7,000 tons of grain and 2,000 tons of rapeseed receiving a base price (approx. 40%-70% of the total value of grain). The remaining part of the price is still fluctuating following the grain stock market. The Company can fix the price and get paid for the rest at any time. Such a sale structure is very common in the grain farming industry which allows the farmers to wait for a favorable price and gain extra revenue. As a result, there are approx. EUR 1M pending revenue for the sold grain which led to a lack of working capital.

In December 2022, Capitalia issued two short-term loans to the Company to cover seasonal payments to a bank. The repayment of Capitalia loans is scheduled for the 15th of March, and was based on pending proceeds from the sold grain; however, the grain prices still are not favorable to fix them and invoice the grain buyer for the remaining part. As a result, the Company seeks additional financing of EUR 612,600 for 6 months to refinance both Capitalia loans for a longer term. The loan will carry a 12.6% annual interest rate (1.05% monthly) with monthly interest payments and principal repayment at the end of the term. The repayment of the loan is based on the proceeds from this year’s harvest in autumn and guaranteed pending proceeds for the sold grains. The loan will be issued to one of the group companies while the shareholder and the Company with EUR 2.6M equity capital will provide guarantees for the loan. The project risk rate is B (81 out of 100). This project has a minimum financing threshold of EUR 357,350 in order to be executed.

Key investment highlights

There are a number of factors that make lending to the Company an attractive opportunity and the main highlights are as follows:

  • The Company successfully operates the business for more than 10 years.
  • The loan is secured with a personal guarantee from the owner as well as a guarantee from the largest business unit of the group.
  • The Company has been operating with profits for the last 3 years.
  • The loan repayment is based on two streams of income: guaranteed pending proceeds of at least EUR 1M for the sold grain and this year’s grain harvest in autumn 2023.
  • One of the group’s companies is a historic client of Capitalia having repaid a loan of EUR 50,000, and the active loans are serviced with excellent payment discipline.
  • The Company has a strong equity capital of EUR 2.6M.
ID 16827-4-LV
Industry Agriculture
Location Latvia
Loan type Business loan
Term 6 months
Expected return 12.6%
Interest rate Monthly
Amortisation At the end of the term
Risk grade B (81 out of 100)
Personal warranty From the owner and
related company
Collateral None
Capitalia's cofinancing 15600
Target amount 612600
This loan is already funded.
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