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Funding requirements checklist for Farmers.

Mbali Nwoko - 15th Jul 2020 - 12 comments

The decision to seek funding or investment for your farm requires a significant amount of planning and detailed thought on what and how you are going to finance your farm. And if you are seeking partners in your business, you would also need to consider the amount of equity or shares you are willing to giveaway to the potential investors/ business partners.

It’s important to note that there will be a list of documents (see below) required to submit to financiers and financial institutions that will determine the outcome of your funding application.

Finance requirement list:

  • Financial Statements (most recent and updated)
  • Cashflow Forecast
  • Personal Assets and Liabilities Statement
  • Company Registration documents
  • Letters of Intent from Customers (off-take agreements)
  • Business Plan
  • Proof of Land Ownership (Title Deed) or Farm Lease Agreement

PS: The above is a general list however, this may differ with various organisations. 

Please take note of the following regarding the above:

1. The financials must include the accounting firm’s name, address, contact details, notes and have to be signed off by the accountant and yourself (farmer/business owner). If the above is not in place, most Credit Managers ie: from banks, will not accept your financial statements.

2. The cash flow statements need to show your income cycle and monthly expenses (indirect expenses i.e: fuel, electricity) and input costs (direct expenses i.e: fertilisers, seeds) or cost of sales. In the income tab, you would need to add your sales in the month/s that you expect to sell your product. Once again, depending on the company you are approaching for financing, they would require cashflow forecasts for either three (3) or five (5) years.

The cash flow statements will give the financier an idea of what turnover and profits they can expect from the business in the next coming years.

3. The personal assets and liabilities statements provide an overview of which assets you as the business owner have in your personal capacity and who your creditors are. It’s important to also have a good personal credit record, as financial institutions also conduct background checks on the owner/s of the business. If the farmland/property is owned by you (the individual) and would like to add this asset as security in securing your loan when approaching banks (for example), the banks will use that security by taking a covering bond over it and will only allocate 50% of the agricultural property’s value as security.

Example: If your farms’ value is worth R1 000 000 (one million rands), the security reliance will be 50% of that = R500 000 (five hundred thousand rands).

Normally, financiers would place a high degree of reliance on the past trading history of the business and strength of the financial statements/balance sheet for the funding being applied for. Even though projections may have been supplied, they still have to be proven and tested.

If your past trading history shows a loss in your income statement, you would need to provide valid reasons why this occurred and show how you plan on mitigating these losses in the future and the financier will make a decision at their discretion.

Remember, that applying for funding does not automatically guarantee a successful application, however, if and when you are presented with the opportunity, ensure that your documents are up to date, as compliance and the inability to produce accurate financial business records is one of the primary reasons why farmers fail to raise funding.

Please feel free to comment or share this blog to individuals that may find this useful.

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  1. Ignatius Mazura

    When selecting an agricultural persuit be it crop production or livestock production what dictates the choice of your agricultural persuit?

    • Mbali Nwoko

      Hi Ignatius, its a number of factors such as climatic conditions, research, cashflow /capital that you have, your passion whether crop or livestock and from a macro level, you can consider the markets, future opportunties, risk etc…
      Perhaps do a SWOT analysis for yourself and see which will suit you best.

  2. Netty

    I am still new in farming and now I know where to go when I need help

  3. MoganeLegoshi

    Hi Mbali,I’ve seen on how your funding works n its requirements,now that I’m a home based broiler n vegetable grower but have accrued a new site for the business which currently need fencing n stuff,I would appreciate it to hear from you my contacts details are 071 338 3484

  4. Bhomba

    Hi Sis Mbali.

    I am planning to get into the farming sector. Even though, I am not yet certain of what to plant. But, definitely I will start very soon.
    However, for now, I am trying to sort out some issues with my family’s title deed. While doing that, I am also doing as much reading as I can to equip myself with all the information about the industry. And, I find your blog quite informative.

    Thanks a lot. Keep it up.

  5. Zwelakhe Mbowane

    Hi Mbali

    I am a 33 year old man who is very impressed with what you are doing I would like to spend more time in your farm to advance my learning from the best like you. I inherited a field of 6.8 hectares in Mpumalanga. The fencing is done. 2 hectares well debushed .

    Seedlings are well catered for. Manure is collected from the village kraals as a method of cleaning them to reduce cow feet dieses during rainy seasons.

    My ask is to get borehole as a water source. The two hectares is basically ready for planting, but the main resource water is now a scarce resources. The dam I built is not going to sustain the demand.

    Please help me to acquire the source of water that has the irrigation system using solar energy.

    Your response will be much appreciated.

    Musa Zwelakhe Mbowane

  6. Mbali Nwoko

    Hi Musa
    Thank you for your message.
    Prior to planting, you need to ensure that you have enough water. You will have to contact borehole drilling companies in and around your area to find out if there is water in your farm, then you will have to do a water test on the borehole to get an idea of how many litres per hour your borehole can give. Then you will also need to do a water test, to check the water PH and if there is any diseases in the water. Without water, you cannot farm.

  7. Marshall

    Good day to you.
    I would like to ask do you fund even a person who is starting a business from scratch I have a great business plan proposal but my obstacle is finance I have no finance to kickstart I already have a land.
    Thank you

  8. Kwanele Mdletshe

    We in a processes of starting a farming business we have a land but we don’t have resources and funding

  9. Oscar Rammutla

    Good day Mbeki I have 8 hectares of land with existing structure and need to be converted to abattoir.I need financial assistance or financiers can you asist in this regard.

    Oscar Rammutla

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