HeavyFinance launches in Latvia with the first loan already listed on the platform. It is an important step of expansion for a leading borderless marketplace which connects small and medium farms with a global investors community.
Together with the launch of HeavyFinance operations in Latvia, we introduce key points about the agriculture sector and its financing.
The agriculture sector in Latvia
- Agriculture has capitalized a third of Latvia territory and constituted around 3.72 of the GDP with a total output of €1.44 billion in 2019.
- Crops production and animal husbandry are the most common agricultural activities in the country.
- From almost 70.000 farms, 78% considered small-sized (up to 20 ha).
- Latvia faces an ageing population problem among people working in the agriculture sectors since there are only 5% farmers, categorized as young (younger than 40 years old).
A lack of financial instruments for farmers
Fi-compass report about financial needs in the agriculture and agri-food sectors in Latvia has shown that the financial gap in the agriculture sector is considered between €17 million and €32 million. Unmet financing needs are specifically concentrated among small-sized farms that are seeking long-term loans for the development. Most investments are made mainly in heavy equipment or buildings, which requires long-term for successful implementation.
Farmers are looking for a more individualized approach and more flexible financial instruments
Traditional lending institutions are dominating the supply side of finance in the agriculture sector with a total market share of 72%. However, many small farm holders in Latvia do not consider bank loans as suitable financing options due to unacceptable lending conditions. The main reason is the necessity for the initial contribution. The requirement can be impossible to implement for growing small farms since they are heavily investing in the expansion.
On the contrary, HeavyFinance has a more individualistic approach to every client, since every farm’s situation is different. Our team evaluates the credibility of the farm holder and takes into consideration the overall perspective of the farm’s growth.
A need for working capital loans
Working capital loans are a relevant option in the Latvian agri-food sector. These loans are important for running and developing businesses and they can account for up to 80% of total loans. Banks usually offer short-term loans, which is usually unacceptable for small farms, since they are less capable to handle short-term liabilities.
HeavyFinance offers up to four-year loans, including working capital loans and that expand farmers’ options to receive financing for the development.
Positive attitudes towards investments in agriculture
One of the main investment drivers is the modernization of production mechanisms. Farmers understand that Investment in modern production technologies facilitates production expansion and helps to improve efficiency. The broadened supply of financing solutions for farmers only helps them to grow faster and use more efficient tools to maintain successful business operations. HeavyFinance stepped in the supply side of the financing with a mission to help smaller farmers to grow and meet the growing worldwide demand for food while applying modern solutions and equipment.
You can read more about the agricultural financing in the report fi-compass, 2020, Financial needs in Latvia’s agriculture and agri-food sectors.