You probably noticed that recently we listed a lot of loans of up to 15 000 € backed with sole accountability on the platform. It is gratifying that in the two weeks since the first such loan was announced, we have already managed to finance more than 20 loans backed with sole accountability.
Such loans have a higher interest rate by 2% compared to those, which are secured by first-rank collateral. As investors become more interested in such investment opportunities, more questions arise, therefore, we dedicate this blog post to answering to most common questions and sharing some insights to dispel uncertainties.
1. Loans backed by sole accountability are issued to farmers faster since fewer documents are required to finish the process. Therefore, the collected funds can be transferred to the farmer\’s account within a couple of days after the loan is financed.
2. Such loans are usually intended to supplement the working capital of the farm. Furthermore, the need for working capital loans of up to 10.000 € is the highest during the summer months. Let\’s talk about one example in detail to gain a better understanding, of why even some big farms need these small loans. Drop farms receive most of their income in the third quarter of the year after the harvest and the early first quarter of the year by receiving grants. The money from the sale of last year\’s harvest is often used to prepare for the new season: to sow, to take care of its fertilizer and maintenance. When most of the available working capital is invested in crops, some farms struggle to cover unexpected expenses – to replace worn-out technical parts, hire more seasonal workers, etc. This is why small working capital loans are popular during the summer.
3. Sole accountability means that the farmer who takes out a loan is responsible for his ability to earn income and is liable for the loan with personal assets. In the case of a default, the recovery would be carried out in a general manner (HeavyFinance would not have priority over creditors).
4. Does HeavyFinance provide such loans to all the farmers? The answer is no. As with all other loans, we analyze their financial performance and assess their creditworthiness to assign an A, B, or C rating. Some applicants are assessed as too risky, and therefore those loans do not end up on the HeavyFinance platform.
5. Delays of payments. As we have recently started providing loans of up to 15 000 € backed with sole accountability, we do not have any delays yet. But we are self-conscious that there will be some delays in instalment payments. Especially, it can happen in late July, August and September, when the farmers will be working in the fields from dawn to late night. The priority for them will be to take care of the harvest to ensure income. However, in the case of delay, we apply a daily fee of 0.1%. The collected amount of fee is distributed to the investors and goes directly to their banking accounts. Therefore there is an opportunity to earn more.
Don’t miss your chance to invest in new types of loans on the HeavyFinance platform. You can find all our projects here.