some point during the life cycle of every business, more money will
eventually be needed. More money will be needed to grow, expand or to
keep the business running.
there are several funding options available for you to grow and expand
your business, you need to be aware of each option’s features and how
they suit your business needs. This is especially critical for
agribusiness entrepreneurs or farmers due to the peculiar nature of the
farming business. This post will examine the funding options available
to farmers, how to prepare to raise funds and how you can get the CBN
addressing the CBN Agric Loan, funding options available for farmers
and how to access them, it is important to establish a good foundation
for preparing to raise funds.
Preparing for Funding
You must be very clear about these two things before you seek to raise funds for your agricultural business.
decide what the money or CBN Agric Loan is going to be used for. There
are good and terrible reasons for getting a loan for your agricultural
business. Some good reasons for getting a loan include purchasing
equipment, buying land to expand, hiring experienced and qualified staff
etc. Terrible reasons for taking a loan include financing harvest or
production losses, renovating farm office, or acquiring non-essential
business assets like television sets, decorations etc.
decide how much money your agricultural business really needs. Most
agricultural business owners don’t ask for a large enough loans.
Under-estimating the amount of money you need can lead to problems with a
lack of working capital sooner than you expected. This can lead to
lenders second guessing your business decisions going forward. While
over-estimating can make lenders doubt your assumptions and credibility.
Have a well thought out budget that is supported by realistic financial
projections (profit & loss statement and cash flow statement)
you’ve completed these preparatory steps for raising funds, you need to
become aware of the funding options or sources available to you.
Sources of Funding
funding options available to help you grow, expand and diversify your
agricultural business can be broadly classified into the following
categories: Crowdfunding, Angel Investor(s) and CBN Agric Loan
you are just starting out or your agricultural business is at the
infancy stage, it will be very difficult to get a traditional lender or
investors interested in funding your business. If you aren’t ready to
sell off your assets or borrowing against them, your only option is
is a way of raising money by getting financial contributions from a
large number of people. Crowdfunding is a form of crowdsourcing and of alternative finance.
Several crowdfunding platforms have emerged that allow people to donate or invest in agriculture-related opportunities. AgFunder
is one global platform that gives both individual and institutional
investors access to venture capital investments, both in agriculture
technology and food technology companies. Cropital and Farm Crowdy are platforms that allow investors to invest in small-holder farmers, and rewards-based platforms like Barnraiser allows users to support farmers and food startups. You can also check out platforms like Indiegogo, GoFundMe and KickStarter
for help in raising funds too. Each of these platforms has their rules
and guidelines on how you can raise money for your particular needs.
Some benefits of Crowdfunding are:
- It’s more efficient than traditional fundraising
- It’s a place to build traction, social, proof, and validation.
- It’s an opportunity for crowdsourced brainstorming to refine your idea.
- It gains you early adopters and loyal advocates.
- It doubles as marketing and media exposure for your business.
angel investor can either be your friend, family member or any wealthy
individual who provides you with capital for your agricultural business
in exchange for owning a part of your agricultural business. This
funding option is available to you if you’ve been in operation for a
while and you have proven the viability of your agricultural business.
The advantages of this funding option are:
- You can raise the amount of money you need quickly and from one person
- The ownership equity arrangement can be flexible
- You can benefit from the angel investor’s vast business knowledge and experience
- No payment of monthly fees and charges that banks and traditional lenders require
this option might be a good fit for you, it has its disadvantages. You
may find it hard to raise additional money when your investor hasn’t
gotten a return on his or her initial investment. Some angel investors
interpret the ownership equity they have as a right to dictate how to
run your agricultural business.
CBN Agric Loan
order to promote commercial agricultural enterprises in Nigeria, by
reducing the cost of credit to farming businesses, the Central Bank of
Nigeria (CBN) established the Commercial Agriculture Credit Scheme
(CACS)—CBN Agric Loan. This Fund complements other special initiatives
of the CBN in providing concessionary funding for agriculture in Nigeria
such as the Agricultural Credit Guarantee Scheme (ACGS), Interest
Draw-back scheme, Agricultural Credit Support Scheme, etc.
CBN Agric Loan (or CACS) is financed from the proceeds of the
N200billion three (3) year bond raised by the Debt Management Office
(DMO). The fund has been made available to participating banks to
finance commercial agricultural enterprises. In addition, each State
Government can borrow up to N1 billion for on-lending to farmers’
cooperative societies and other areas of agricultural development
provided such initiatives/interventions are in line with the objectives
of the CACS.
agricultural businesses eligible for this CBN Agric Loan (or CACS) are
any farm or agro-based enterprise with agricultural asset (excluding
land) of not less than N100 million for an integrated farm with
prospects of growing the assets to N250 million within the next three
years and N50 million for non-integrated farms/agro-enterprise with
prospects of growing the assets to N150 million, except in the case of
on-lending to farmers’ cooperative societies.
your agricultural business meets the CBN asset requirements above, it
must also be involved in the following commodities and value chain in
order for you to get the CBN Agric Loan:
- Cash Crops: Cotton, Oil Palm, Fruit Trees. Rubber, Sugar Cane, Jatropha Carcus and Cocoa.
- Food Crops: Rice, Wheat, Cassava, Maize/Soya, Beans/Millet, Tomatoes and Vegetables
- Poultry: Broilers and Eggs Production
- Livestock: Meat, Dairy and Piggery
- Aquaculture: Fingerlings and Catfish
PROCESSING: Feed mills development, threshing, pulverization and other forms of transmutation for value addition.
STORAGE: Commodities, Agro-Chemicals and Warehousing
FARM INPUT SUPPLIES: Fertilizers, Seeds/Seedlings, Breeder Stock, Feeds, Farm equipment & machineries.
MARKETING: Agricultural commodities under the focal investment areas.
CBN Agric loan can be accessed through participating deposit money
banks in Nigeria. For example, in order for you to access the CBN Agric
Loan, First Bank of Nigeria created some innovative financial products.
In addition to helping you access the CBN Agric Loan, these products
will also fund your agricultural business that fall outside the scope of
businesses eligible for the CBN Agric Loan. Some of these financial
Conventional Term Loans & Overdrafts
credit facility is for medium and large scale agricultural businesses
whose profile fall outside retail or special government intervention
fund product specification
- Maximum tenor of up to 5 years
- Minimum single obligor limit of N10million
- Interest rate is the prevailing commercial lending rate
that are engaged in agricultural/agro-allied businesses (medium, large
enterprises, corporate and institutional banking clients)
- Flexibility: the structure, tenure and transaction dynamics can be customized to accommodate all types of agricultural projects.
Real Sector Support Facility
special intervention fund of N300bn was established by the Federal
Government through the CBN to address the financing needs of start-ups
and expansion projects of large enterprises by providing low-cost,
long-tenured fund to such enterprises.
- Minimum and maximum single obligor limits are N500million and N10billion respectively
- The scheme would terminate on December 31, 2030
enterprises in the manufacturing, services and agricultural value chain
wholly-owned and managed as a Nigerian private limited company
registered under the Company & Allied Matters Act of 1990
- Low interest rate to customers (9% all-in, max)
- Available for start-ups
- Long-tenured (up to 15years)
Micro Small and Medium Enterprises (MSME) Development Fund
special intervention fund of N220billion was created by the CBN to
provide low cost, long tenored funds to MSMEs to enhance their capacity
for employment generation, economic development and inclusive growth.
- Maximum obligor limit is N50m
- Maximum tenure is 5 years
- Management experience of at least 3 years in the enterprise to be funded is required.
Maximum obligor limit is N50million
- Interest rate: 9% (all-in), no other fee can be charged
- Credit facility is available either as term loan or overdraft.
that you know about the CBN Agric Loan and have compared the funding
options available to support your agricultural business, it’s time to
apply for funding through the options that fit your financing needs.
gain access to the CBN Agric Loan and other funding from the First Bank
products listed above, you’ll need to submit a combination of the
following documents with your formal loan application:
- Feasibility Study/Business Plan
- Board Resolution to Borrow
- Business legal documents (e.g. certificate of incorporation, memorandum and article of association etc.)
more details on these financial products and the CBN Agric Loan, you
can follow up with First Bank’s Agric Finance Desk via email at
closing, you also need to have a good understanding of how the interest
rates of the CBN Agric Loan determine how much you will repay. You will
find an excellent learning resource for understanding interest rates
and calculating loan repayment plans here.
if you need professional help in writing a business plan and proposal
to raise money for your agriculture business, send a mail to [email protected]