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Apr 19, 2022

Innovative funding option for row crop farmers

Article by Premium Finance Partners

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Specialist lender Premium Finance Partners (PFP) has joined forces with agricultural credit facilitator Orbi Serve to provide an innovative funding model for direct inputs for row crop farmers that aims to advance on the current funding offerings provided by some banks and agricultural cooperatives.  The new model, underpinned by a bouquet of insurance products, is funded by PFP and implemented by Orbi Serve.

“The nature of farming requires massive upfront costs before the season starts,” says Orbi Serve director, Adriaan Snyman. “Farmers need to acquire seed, chemicals, fertilisers and other direct inputs – even put options – before the planting process begins. The financial benefits are only realised once the produce or crop has been harvested, marketed and sold, which in some cases can be up to six months later.”

Traditionally, farmers have managed their cash flow during this time by working with commercial banks or agricultural cooperatives, who, in addition to being very expensive, generally prefer to take hard security to satisfy their credit models. These hard securities, mortgage bonds over property and notarial bonds make switching to other credit options nearly impossible - this barrier to exit evaporates in the presence of the Orbi Serve model.

The PFP/Orbi Serve model looks to understand the individual farmer and through a set of innovative insurance products, provides cost-effective funding with no mortgage or notarial bonds taken as security. The model frees up liquidity for the farmer at the beginning of their production season and only requires repayment once their crops have been sold and money received.

“Our partnership with PFP allows us to facilitate a new form of credit that is unencumbered in terms of security. We don’t take any collateral in terms of either fixed or movable property; rather, the debt is secured via a bouquet of insurance policies” says Orbi Serve co-founder, Albrè Badenhorst. “The credit is extended for a shorter term so that the timing of the credit is matched to the duration of the crop. The farmer can then better plan his or her cash flow and doesn't have to go through a complicated credit application often required by banks or agricultural cooperatives.

“Our credit application process is very smooth and efficient. Credit quotes are prepared within two weeks of application.”

PFP managing director, Devan Kerr, says the partnership has created a new and innovative funding mechanism for the agricultural market.

“We believe the funding structure through Orbi Serve is innovative and revolutionary, forward-looking, fresh, and something that we think farmers should seriously consider going forward for their input costs. At PFP we are always looking to invest in funding opportunities that challenge the status quo and this is definitely one of them. It’s definitely the next step for agricultural funding.”

The service is delivered to farmers through insurance brokers and input suppliers, with brokers being the primary distribution channel.  Interested brokers, input suppliers, their agents or franchise holders can access more information by contacting Orbi Serve through their website https://www.orbiserve.co.za/ or via e-mail info@orbiserve.co.za or WhatsApp 079 678 8285.

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