Loan secured by future harvest. What should an agricultural producer know?

In early autumn, the Prime Minister of Ukraine initiated the development of a program to support Ukrainian agricultural producers by state-owned banks. Today, the agricultural sector is a key industry that provides 37% of foreign exchange earnings. Because of this, the leadership of the state is more interested than anyone in the development of this industry.

At the same time, it is not so easy for a farmer to get financing for business development. Bank loans are sometimes unprofitable and require real estate or equipment that a farmer cannot always provide. The problem can be solved by concluding a pledge agreement for the future harvest or issue an agricultural receipt.

When applying for a financial or commodity loan secured by a future harvest, farmers are often denied. Before approving a loan, the risk managers of the bank or other lender conduct a full inspection of the company. They check not only financial indicators, but also the history of cooperation with other contractors, the presence of debts, land documents. What does an agricultural producer need to know to get a loan secured by a future harvest?

Negative court decisions

The first thing the creditor will check is the presence in the Unified State Register of Court Decisions of information about the violation of credit obligations by the agricultural producer. However, the presence of a negative court decision does not always indicate that the agricultural producer is prone to default. If the obligations have not been fulfilled due to valid reasons, such as force majeure or breach of obligations by the creditor, it is necessary to provide the creditor with a written explanation of each dispute.

Enforcement proceedings and tax debt

When you apply for a loan, check to see if there are any open enforcement proceedings or arrests against your company. Sometimes an agricultural producer may not even guess that his company is a debtor in enforcement proceedings. Very often these are small debts or enforcement proceedings that have not been closed due to the negligence of state executors. However, when checking the creditor can not check the amount owed, because this information is not publicly available. Therefore, even if the debt is several hundred hryvnias, the agricultural producer is blacklisted. If it is not possible to close such enforcement proceedings in time, prepare written explanations and documents confirming the repayment of obligations.

The lender's risk managers also check for tax debt. However, the information contained in the tax register is not always relevant and may not contain the amount of debt. Therefore, before submitting documents to the creditor, make sure that you do not have debts to the budget or provide documents on the payment of tax liabilities.

Encumbrance of movable property

The creditor also checks the presence of encumbrances in the State Register of encumbrances on movable property.

Here is an example. Last year, you pledged the future harvest of winter wheat of the third class, which was to be grown on the lands of a certain village council. This year, you again decided to pledge the harvest from the same land plot, but last year's encumbrance was never removed from the register. The lender sees in the register of encumbrances that the harvest from this plot is already pledged and refuses to give you a loan.

Therefore, if you have fully fulfilled your obligations to the previous creditor, make sure that the entry on the encumbrance is removed from the register. Especially when you again plan to pledge a similar harvest from the same land.

Requirements for the land bank

Land plots from which future harvests will be pledged must be properly registered. That is, the right of ownership and lease must be registered in the State Register of Real Property Rights.

If the lease agreements are concluded before 2013, it is sufficient for the creditor that such agreements were registered in the book of records of state registration of land lease agreements, and the lease term did not expire in the current year. Therefore, it is necessary to bring order to the contracts and obtain documents confirming the registration of contracts. This may be a certificate from the village council confirming the existence of lease agreements, the term of the agreements and the area of land leased.

It is also important for creditors that the land plots from which the future harvest will be pledged be placed in one array, and not scattered in different village councils.

In conversations, farmers often complain about the bureaucracy of banks and other creditors, overstated requirements and unjustified refusals to issue loans. In order not to waste time in vain, you need to audit the company and the land bank and properly prepare all the documents. Only under such conditions will the agricultural producer be able to quickly obtain a loan secured by the harvest.

The article is published on the site ProAgro