You probably noticed that recently we listed a lot of loans of up to 15 000 € backed with sole accountability on the platform. We are delighted that within just two weeks, we have successfully financed over 20 loans.
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 arose. Therefore, we dedicate this blog post to answering to most common questions and sharing some insights to dispel uncertainties.
FAQs on sole accountability
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. Working capital loans, typically used to supplement farm finances, play a crucial role in supporting agricultural operations. Specifically, during the summer months, there is a heightened need for such loans, often ranging up to €10,000. To illustrate, let’s consider the case of drop farms. These farms primarily generate income in the third quarter through harvest sales and early first quarter through grants. The funds earned from the previous harvest are typically allocated towards preparations for the upcoming season, including sowing, fertilizing, and maintenance. However, with most working capital invested in crops, unforeseen expenses can strain farm budgets, such as replacing worn-out equipment or hiring additional seasonal workers. Consequently, small working capital loans have gained popularity as a means to address these financial challenges during the summer period.
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 (creditors would have priority).
4. Does HeavyFinance provide such loans to all the farmers? The answer is no. As with all other loans, we analyse 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. Payment delays are a potential concern, although we have not experienced any delays thus far since we started offering loans up to €15,000 with sole accountability. However, we anticipate that some delays may occur, particularly in late July, August, and September. This is when farmers are fully engaged in their field work from dawn till late at night. Their top priority during this period is to ensure a successful harvest and secure their income.
To address any payment delays, we have implemented a daily fee of 0.1% in the event of a delay. This fee serves as compensation and is distributed to our investors, directly deposited into their banking accounts. Consequently, this presents an opportunity to earn additional income.
While we strive to minimize delays, we want to assure our investors that appropriate measures are in place to handle any potential issues and ensure a fair and transparent process for all parties involved.