Better too expensive than not for sale at all

Agricultural companies are mostly family businesses, which together account for billions of euros in exports. This makes them the second largest agricultural exporter in the world. 

Statistics Netherlands data shows that Dutch agriculture accounts for approximately 21 percent of total Dutch exports. In addition, it also appears that more than half of the surface area in the Netherlands is used as ''agricultural land''. However, it appears that only a relatively small part of our society is still working in the agricultural sector. This society collectively has 340 billion euros in their savings accounts to stand. However, the interest rate for this is currently very low or even zero.

Need for capital
Developed companies have a constant need for capital and, as it is in the sector today, I don't see that changing for the foreseeable future. If companies are profitable and earn more than they eat, part of the capital requirement can come directly from profitable operation. In the financial world this is known as ''own contribution''.

Other interpretation
The part that is not available in this way will have to be filled in differently. This is often done, in the traditional way, through the well-known large financial institutions. However, in recent years we have seen that the latter category is somewhat reserved. They demand more own contribution and/or expect a contribution from other lenders. That means, quite simply, a change in the financial landscape that you can best try to adapt to. 

As one of the foremost scholars of the nineteenth century, Charles Darwin, put it: 'It is not the strongest, the smartest, or the fastest that survive, but the one who can best adapt to changing circumstances.'

Crowdfunding increasingly popular
One of the newest financing options, also for the agricultural sector, is crowdfunding. This is sometimes referred to as public funding. In simple terms, someone who needs money applies for it through a crowdfunding platform on the internet and offers the investment opportunities for the wealthy. 

The idea is that these wealthy people, the crowd (who together have 340 billion euros), invest their money in the fund at a pre-agreed interest rate and thus take on the financing of the plan.

Due to the low interest rates on savings and the reluctance of the banks, crowdfunding is still gaining in popularity. Barack Obama, for example, financed his election campaign more than 8 years ago.

It's a permanent development
You may think that this form of financing is not suitable for you, as an agricultural entrepreneur. However, I note that it is an unstoppable development that, society-wide, is increasing at all levels. In the first quarter of 2017, crowdfunding in the Netherlands grew by 17 percent.

In general, it works as follows: the entrepreneur engages an expert, who tests the feasibility of the investment and submits the application to a crowdfunding platform. The platform re-assesses the risks and feasibility of the plan and then places it on its website. The platform is also opening up the idea to investors. Subsequently, the crowd can decide whether or not to invest. 

Pricing often above that of banks
Investors make their money available for an average of 5 to 10 years, depending on the spending goal. The rates are on average often higher than those of the major banks and investors. After all, "better too expensive than not for sale" applies here as well. 

In addition, as an entrepreneur, you stay extra sharp in this way and therefore act more alertly. The crowd can be regarded as a kind of family and family businesses are known to provide more continuity than companies with large external investors.

I see it this way: 'Money is money'. Do you see it that way?

Peter Pals

Peter Pals is an entrepreneur at Farmers Funding & Advies and grew up on a farm. From his farming heart, he has decided to build up a business for business, financial and tax advice for agricultural entrepreneurs.

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