Financing a project: own contribution, loan, partners, and what a bank looks at in a file
A house of 8 m by 30 m lasts fifteen years; the feed of a flock is eaten in six weeks. Financing both the same way is the mistake that has closed more farms than disease. Level 5 showed you how to finance a first house and level 15 how to write the business plan; this lesson puts you on the side of the one who decides: how much is really needed, where the money can come from, what each source costs in freedom and in risk, and what a banker reads in ten minutes in your file. Everything is in units and percentages; no rate, no amount is invented here: those are written in your bank's offer and in your own accounts.
14 min read · 5-question quiz at the end
By Abdul Hussein ChoumanFounder of NEXTEKCI · Agnibilékrou hatchery since 2006This lesson is part of Farm manager: finance, growth, succession specialisation. It opens to every registered student, from free registration. Levels 1 to 5 and the tracks remain readable by everyone.
A house of 8 m by 30 m lasts fifteen years; the feed of a flock is eaten in six weeks. Financing both the same way is the mistake that has closed more farms than disease. Level 5 showed you how to finance a first house and level 15 how to write the business plan; this lesson puts you on the side of the one who decides: how much is really needed, where the money can come from, what each source costs in freedom and in risk, and what a banker reads in ten minutes in your file. Everything is in units and percentages; no rate, no amount is invented here: those are written in your bank's offer and in your own accounts.
- ✓Quantify the complete need of a project (investment, equipment, money to advance) and apply the matching rule between the life of the asset and the duration of the financing
- ✓Build a financing plan in units with own contribution, loan and partners, and read each one's share
- ✓Name the five things a bank looks at in a file and calculate the ratios it will calculate
- ✓Check that a project still repays in the pessimistic scenario before signing
- What has to be financed, and for how long
- How much is really needed: the complete need for the third house
- What a bank looks at, and the ratios it calculates
- Partners: what they bring, what they take
- Before signing: does the project repay in the bad year?
- Going further
- •Three needs, three durations: house 15 years, equipment 5 years, money advanced permanent; the duration of the financing follows the duration of the need.
- •Complete need for the third house: 10 (house) + 1.7 (equipment) + 3 (money to advance) + 0.3 (contingencies) = 15 units; plan: own contribution 3 (20%), loan 12 over 3 years (4 of principal per year).
- •The bank looks at: track record, repayment capacity, own contribution, guarantees, consistency; coverage ratio 5 ÷ 13 = 38% (prudence: under 50%), debt 12 ÷ 13 = 0.9 year.
- •Partners: associate (share of power), support programme (conditions), supplier credit (+6% on feed = 20% of the flock's margin), tontine, rental; everything is written.
- •Final test: the instalment goes through in the bad technical year (79%) or price year (100%), not both together; the reserve must cover one instalment before signing.