Private credit is a market that has come to prominence since the global financial crisis, with reports of it being worth about $200 billion in Australia.

That’s a substantial number in anyone’s language.

A percentage of this is allocated to agriculture.

In some ways, you could argue that private credit has always been part of agriculture.

Examples are the retired farmers that loan to existing agribusiness operators.

They do this for solid returns, and as importantly, they understand what the borrower does.

Another example is a business I have come across in recent times called Delay Pay.

I think the business model is interesting, and they have found their niche within the marketplace.

Speed and convenience are the two major drivers of the business.

It’s not hard to compete against banks on this measure, with approvals taking longer than ever.

This isn’t a criticism of the banking sector, as banks have a whole lot of compliance hoops to jump through to approve loans.

Delay Pay concentrates solely on the farming sector, and with standard credit checks will forward funds within 24 hours.

The rates will never be comparable with banks, but they aren’t in competition with banks.

The loan size can be up to $500,000, but the average loan size is much less than this.

Loan terms are a maximum of 180 days, and the product is mostly used for opportunity purchases.

Examples include securing machinery or livestock at auction.

This allows the business to secure the asset quickly, and then gives the farming business time to organise funding with their incumbent bank in due course.

This type of product isn’t designed to replace core bank funding but works hand in glove with the businesses already locked in facilities, and adds flexibility to the farming operation.

Delay Pay is a goods trader, and they need to know what is being purchased, they are reasonably flexible with what can be bought, but there are limitations.

As with all forms of lending, the borrower has entered into a contract and is responsible for paying back the facility on agreed terms.

Delay Pay has secured trade credit insurance, and this gives funders confidence in the business model.

The people behind the business have extensive experience in the sector and with this type of product.

Another interesting aspect of this business for me was the funding source.

Predominantly, Delay Pay has a funding line in place from an established private credit provider.

There is obviously a great relationship between the parties as evidenced by the growth of the business.

In recent times, there has also been an equity raise.

Many of the equity investors are farmers, the trust loop seems quite circular.

As private credit continues to mature in Australia, I am sure there will be many opportunities for this product to find its way into agriculture more fully.

Just like the banks, the private credit investors view agriculture as a safe bet.

This makes sense, as the agricultural sector has a stellar record in relation to meeting its financial obligations.