Hectare has announced Advance Pay. With cash flow often a key issue for farmers, Advance Pay enables them to receive up to 80% of their grain contract payments upfront. The amount offered ranges between 50% and 80% of the total amount. This is paid within three days following the upload of the contract details.
Farmers that use Hectare Trading are automatically assessed and pre-approved to take advantage of the new advanced payment process. Farmers can sign up to the trading platform that enables them to negotiate fair prices for their grain from the sellers available on the market. Users are able to see the minimum, maximum and average prices on the platform. With the ability to create alerts when prices hit certain thresholds to enable them to make better decisions.
Advance Payment has fees that are calculated daily, though details are not available on the website.
For those farmers already trading through the Hectare platform, this could replace often hard-to-find and expensive bridging loans. Traditional finance options also consist of significant administration paperwork. This takes up valuable time, which farmers have more productive things to do. Tying their trading platform data to the early payment option means that farmers can obtain cash quickly and earlier should they need it.
The caveat is that they need to check that they can afford the repayment terms. And that this does not offset any benefit of obtaining the cash early. Hectare states that the advance payment terms are at “fair market interest.”
Timely announcement from Hectare
The announcement comes at a time when many farmers are concerned by the impact of the wet weather the UK is experiencing. Crops have not sunk deep roots, which could, depending on the weather, limit yields later in the year. While the fields have, in places, been too wet for many livestock to return to them. The increase in the price of cattle feed as winter stocks have run out has had a subsequent impact on cash flow.
Hectare is a technology company that is digitally transforming agriculture. This latest announcement delivers a digital finance solution to alleviate cash flow issues for farmers. It offers farmers a better choice of when they are paid. With the possibility of early payments they can then use to invest in their farm.
Advance Pay has no administrative costs associated with it, merely the repayment terms (though these are unclear).
Vanessa Lenssen, Chief Product and Growth Officer at Hectare, says, “Hectare was created by farmers, for farmers. We wanted to solve the complex puzzle of last-mile trade finance for our farming community. We faced sceptics, but we felt that just maybe we could do something special and today, we’re proud to break new ground and support our customers in building sustainable financial success for their farming businesses every day.”
Enterprise Times: What does this mean
Anything that can help the farming industry without increasing administration is welcome. While Advance Pay has costs, these appear to be the same or perhaps even less than most other finance options.
What is unclear about this deal is the link between the grain contract that farmers are receiving the payment against, and the final contract price. Does it mean that the grain contract is fixed? The challenge is that there are many variables around the price of the final payment. It is unclear what happens if the value of the contract changes or if it is locked in at the time of the Advance Payment. Who takes the risk of the price change?
