Saskatchewan Agribusinesses Take Advantage of Nextrade's Financing Solutions

Source: Saskatchewan Agriculture and Food

Here is a home-grown solution for agribusiness export needs: Nextrade Finance has been providing Saskatchewan exporters with customized financial solutions since November 2004. It is an initiative of the Saskatchewan Trade and Export Partnership (STEP), and Glen Millard is its director.

One of the greatest challenges faced by service providers, and the companies they work with, was a real lack of financing for small-market export transactions—short-term 90-day receivables, valued at $150,000 U.S. or less, he explains.

“There is a multitude of reasons for that, one of them being their one-off nature. You sell to a buyer in Germany, and you might not be able to sell to him again for 18 months, or three months.”

One of the Saskatchewan companies that has been taking advantage of Nextrade’s services is Regina’s Farmer Direct Co-operative Ltd. They export organic durum, flax, hemp and barley, among other commodities.

“We have clients around the world," says Jason Freeman, the co-operative's sales and marketing manager, "and Nextrade Finance provides us with the kind of critical account receivable financing that allows us to get paid immediately after we ship our product, instead of having to wait 30 to 90 days. As you can imagine, this gives us a considerable advantage in carrying out our day-to-day business. I can’t praise it enough.”

Nextrade’s services are certainly popular. Since December 2005, Nextrade has financed $1.5 million in exports, according to Millard.

“We did $3.7 million in our first year, so that’s $5.3 million since the inception of the program. Our strength is the fact that we can customize our lending to meet the needs of our clients. With Farmer Direct, if they are purchasing products from one of their suppliers to meet an export order, they may have to purchase that 40 days in advance to fill in that order and ship it.

“What we do for them is make available the capital they need to purchase that product so they can pay their suppliers immediately. They do what they have to do to that product— whether they have to clean it, sort it or get it ready for shipment, and the day they ship, we would then pay them the total amount, depending on what the export receivables were.”

It is a kind of bridge financing for exporters. Nextrade allows them to conclude these small transactions without having to overextend themselves and use traditional credit facilities.

“We are a non-asset-based lender, so exporters don’t have to put up their assets for collateral," says Millard. "We actually lend against the paper of the transaction, so we spend a lot of time doing our due diligence process, analysing the actual export sale documentation. We have uncovered a lot of variances on behalf of our clients, and have really helped them tighten those things up, which of course results in payments being made more quickly by their buyers. It shortens accounts receivable times, and really improves a lot of our clients’ payment history.”

Essentially, Nextrade Finance accelerates the business cycle for these enterprises.

“We are getting them their cash more quickly. There are two reasons why we do it: to make available the financing so that companies have the financial capability to fill export orders, and to eliminate or reduce their risk as much as possible.

“We pay the Saskatchewan exporter in Canadian dollars, yet we allow the foreign buyer to pay us in whatever currency they choose, as long as it is a tradeable currency. It is a definite advantage for companies because, if you have been following the U.S. dollar for the last four years, you know that the Canadian dollar has appreciated quite a bit, and a lot of companies have lost money by not hedging. The fact that we pay in home currency eliminates that currency risk for them. We use export credit insurance products, so we take away the risk of buyer non-payment.”

Nearly half of Nextrade's business is in the agricultural sector, says Millard. Their most recent figures, compiled on March 17, show that $2.3 million has been generated through agricultural commodities. The biggest users of Nextrade's agricultural services have been exporters of organic crops.

“Since the inception of the program,” Millard explains, “we have supported 58 agricultural export transactions, each worth an average of $38,800. Export companies usually use our support for 47 days. Agricultural commodities are the fastest growing sector among our clients. To date, 56 per cent of our clients are located in rural Saskatchewan.”

Nextrade Finance's services can be accessed by any company in the province. Visit www.nextrade.ca to find out more.

For more information, contact:

Glen Millard
General Manager
Nextrade Finance
(306) 787-7936

Jason Freeman
Sales and Marketing Manager
Farmer Direct Co-operative Ltd.
(306) 352-2496 ext. 222