Agriculture SMEs finance equipment, working capital, and seasonal inventory through Maclear crowdlending when bank credit is slow or unavailable. Each agricultural borrower passes due diligence — financials, collateral, and country-risk checks — and receives an internal risk score. Loans are secured by registered assets such as machinery, vehicles, or inventory, and investors receive monthly interest. Returns are not guaranteed.
Capital-intensive sectors of the economy do not only include IT and the pharmaceutical industry but also agriculture. The development of a company that produces food or grows crops is dependent on early investment at the beginning of the cycle of production. Only after the production cycle is fully complete do the companies gain revenue by harvesting and processing crops and then selling them on the market. Often used by small and medium enterprises, companies that run agricultural businesses may suffer from temporary payment difficulties at the beginning of the cycle, even if the long-term business development trajectory is profitable.
The capital that is constantly at work is a major reason behind the businesses seeking investment into their agricultural projects. Business expenses include the purchasing of fertilizers, food for animals, packaging materials, and farming equipment like tractors or irrigation systems. It is necessary to purchase this equipment in advance to reap the benefit of using the best equipment to have a productive crop growth cycle to later realize the produce with more revenue. Therefore, businesses may lack funds at the start and require the loans that will support day-to-day operations.
Although traditional lending instruments like banks remain an option, agriculture demands attention to the production cycles that are connected to the seasons, weather, and the type of the crops grown. Therefore, waiting for an approval of a bank for the loan can make the business lose its competitive advantage by losing the best planting window or failing to secure stable irrigation during the heat wave. Crowdlending is a feasible alternative that offers a solution by connecting investors directly with the borrowers. This complementary option to a traditional loan from the bank gives the investor an opportunity to have exposure to private loans.
Businesses in the field of agriculture often resort to a combination of financing methods for their activity, including supplier credit, bank loans, crowdlending, and retained earnings. The investors who fund agricultural businesses directly have direct exposure to real business processes rather than acquiring a share in the company. In return, the investor gets fixed interest payments and the potential repayment of the principal when the claim reaches maturity.
Production cycles in agriculture carry many industry-specific risks, including weather changes, supply chain disruptions, climatic disasters, and volatile commodity markets with a varying seasonal demand. All these are the factors that may influence the ability of the business to repay a debt owed to the investor. Therefore, before an agricultural investment project is listed on the market, Maclear conducts all the due diligence procedures necessary to assess the real financial situation of the project. The assessment starts with the scoring of the company’s financial performance using the repayment history, cash flow analysis, and assessment of the historical financial performance. At this stage of the process, Maclear uses metrics like Debt-to-Equity (D/E), as well as repayment history.
Then, Maclear performs a separate assessment of the collateral against the loan. The collateral against a loan for the agricultural business usually involves field machinery, irrigation equipment, and sometimes other tangible assets that are reviewed based on their initial market value and the potential liquidation value. Then, Maclear also performs a regional and sectoral risk assessment, considering the impact of weather, current commodity markets, and employment situations alongside legal requirements of the agricultural SME.
After the review is done, every project receives an internal risk score based on the perceived financial situation, the degree of a loan being secured against the collateral, and repayment capacity. The score is intended to provide the potential investors with all the necessary information about a project so they can make an informed investment decision. However, risk scoring and prior assessment do not eliminate investment risk.
Loans to an SME in the field of agriculture are usually secured against a tangible asset like farming equipment, machinery, or, sometimes, certain goods that emerge in the production cycle. Tangible assets can be used to protect the investor from the potential losses if the borrower fails to repay the loan. However, the collateral only mitigates the risk instead of eliminating it completely. The same principle applies across the platform, and it is worth understanding what backs a Maclear loan more broadly.
Loans for the agricultural projects are often put against a collateral that comes in the form of commercial vehicles, crop processing machinery, irrigation systems, storage facilities like silos, or some inventory owned by an SME. However, the exact collateral varies from loan to loan depending on the asset made available by the business owner who is asking for a loan and the loan’s purpose.
The assessment of the collateral requires calculating both the base value, that is, the market price of the asset, and the Loan-to-Value (LTV) metrics. LTV shows the percentage of the loan covered by the collateral, with a conservative LTV (lower than 100%) showing that the market value of the collateral exceeds the amount of the loan and vice versa. The lower the LTV, the better is the security of the loan. The higher the LTV, the less backup against the collateral is available. For a deeper look at how to assess Loan-to-Value ratios, LTV is calculated using the following formula:
LTV = Loan Amount / Collateral Value × 100
The collateral in agricultural business is often tied to a particular season; therefore, precise evaluation is a must. Although the equipment for farming and transportation have a relatively stable value, the market price of the harvested goods differs based on the season. A fair assessment of the collateral is an important step before the loan is attributed to the borrower.
Projects related to agriculture from Maclear’s portfolio feature many types of agricultural SMEs that have different ways to secure their financing through loans. These sit alongside deals from other sectors in Maclear’s overview of funded projects. An overview of some of the projects is given in the table below with the prior consent of the project owners.
| Borrower | Country | Sub-sector | Loan Amount | Annual Interest Rate | Term | Risk Score | Collateral Type | LTV |
|---|---|---|---|---|---|---|---|---|
| WEST AGRO GROUP | Bulgaria | Organic almonds and dried fruit | €50,000 | 14.6% | 14 months | BBB | Equipment and assets | 45% |
| V C CAPITAL | Bulgaria | Oyster mushrooms | €50,000 | 15.7% | 14 months | A | Equipment and assets | 57% |
| Balkan Cannabis | Bulgaria | Licensed industrial hemp seed cultivation and processing | €50,000 | 14.8% | 14 months | A | Assets | 67% |
Data on the projects as of publication date. A track record reflects past performance only and does not guarantee future results.
The example of a Bulgarian agricultural business, WEST AGRO GROUP, producing dried fruit and organically grown almonds, is one of the cases. The business was able to attract €50,000 in investment on the terms of a loan with the duration of 14 months and the annual interest of 14.6%. The project was secured against a collateral with an LTV of 45% and was credited with an internal risk assessment of BBB.
V C CAPITAL is another company that secured a similar loan of €50,000. A Bulgarian producer of oyster mushrooms required a loan for the duration of 14 months with the annual interest amounting to 15.7%. The loan was once again secured against the collateral with a value of 57%.
Balkan Cannabis, the licensed producer of CBD and GCB industrial hemp that is grown in the specialized greenhouse facilities, also asked for a loan of €50,000. Initially, the company received the funds under an annual interest rate of 14.8%, being attributed an A risk score and backed by the collateral with the LTV of 67%.
Seasonality directly affects loan repayment, as agricultural companies usually gain revenue after the completion of their production cycle, processing the harvested goods, and selling them. In order to avoid payment disruptions and ensure that the investor has their risk mitigated, the repayments are structured around the production cycle of the company, and prior due diligence is carried out to assess the reliability of the project.
In order to calculate the expected returns, a theoretical example tailored to Maclear methodology is necessary. Supposedly, the investor has bought a claim with the value of €100 in the agricultural project. The time until maturity is 6 months, whereas the interest payment is around €7.60.
Using the formula of the Annualized Return on Investment (AROI), that is AROI = (Expected Earnings / Remaining Period) × (365 / Principal Purchased), the AROI would be around 14.8%. You can read more about how AROI is calculated on Maclear.
Illustrative example only; returns not guaranteed
An agricultural field includes both the common investment risks like borrower’s default risk and liquidity risk as well as specific industry-related risks like seasonality, volatile production output, weather conditions, and fluctuation of prices on the goods. The platforms that enable crowdlending to the agricultural businesses may provide additional layers of protection of the funds, including the secured loan against the collateral with a conservative LTV or the Maclear Provision Fund to ensure temporary interest payments in case there is a disruption from the borrower. None of these tools, however, guarantees returns as the risks are mitigated, not eliminated. Investors can further reduce concentration by diversifying across borrowers and sectors.
Risks related to agricultural investment include commodity prices, weather, seasonality, and unpredictable final harvest output. Prior assessment reduces potential losses for the investor but does not eliminate them; recovery is not guaranteed.
Farms use crowdlending because agriculture depends on seasonality. Sometimes, banks take too long to approve a loan, meaning that a business owner may miss the optimal planting or harvest window, and therefore, the owners resort to alternative financing methods.
An agriculture loan can be backed by the collateral that can include farming equipment, commercial machinery, storage capacities, and even some volume of the harvested goods. The collateral is assessed with an LTV metric.
Seasonality directly affects payments by forcing the structuring of the loan around the production cycle of a business. Since many producers receive revenues months after harvesting the crops, seasonality becomes a decisive factor that advocates for the adjustment of the loan terms to fit it.
The main risks of crowdlending in agriculture are divided into industry-specific and basic. Industry-specific risks include seasonality, weather conditions, and commodity price volatility, while basic investment risks like credit risk and liquidity risk also exist.
No, returns are not guaranteed. Crowdlending, as any other investment, required the investor’s responsibility for their financial actions. Despite platforms like Maclear being able to conduct prior due diligence, offer a loan secured against the collateral with a conservative LTV, or offer the temporary payments through the Provision Fund, none of these mechanisms entirely eliminate the risk of investment.
Maclear AG is a Swiss-based P2P lending and crowdlending platform headquartered in Switzerland. The company operates as a financial intermediary in the non-banking sector and is a member of PolyReg SRO, in compliance with Swiss financial regulations including AML, KYC, and GDPR. Maclear offers retail and qualified investors access to vetted business loan opportunities, with built-in risk assessment, a Provision Fund, and a Secondary Market for liquidity.
The content of this article is provided for informational and educational purposes only. It does not constitute investment, financial, tax, or legal advice. P2P lending and crowdlending investments carry a risk of partial or total capital loss. Past performance is not indicative of future results. Liquidity on a secondary market is not guaranteed. Readers should conduct independent research and consult qualified advisors before making any financial decisions. Availability of products and services may be restricted in certain jurisdictions.
