Feed Mill Plant Project Financing

Feed Mill Plant Project Financing

Feed Mill Plant Project Financing

Published Jul 6, 2022 


67 Articles

Market prices of industrially processed animal feed depends upon the availability and value of raw materials, number of processing units, number of processing firms and their production efficiency, prevailing demand and etc.

Global processed or concentrated animal feeds alone surpasses the existing animal feed supply in the country.

The establishment of feed mill production in the face of growing competition requires continuous improvement in all aspects. This includes project financing and engineering services, as well as serious organizational and marketing efforts at all stages of the particular.

Construction of a new feed mill plant (or any other large project) requires a considerable amount of financing. And everyone likes to know upfront what the financial viability of the project will be.

During the decision making process for building a new plant or extending an existing plant many questions on the financial feasibility need to be answered. Besides a proper balancing of the pro’s and cons with which financial means the mill will be paid, the financial risks need to be mapped and valued. The aim of a financial feasibility study is to determine the economic and financial feasibility of a project following predetermined critical success factors within a fixed reliability interval.

A project is financially feasible when its return is high enough to cover an acceptable risk. For example, one can put money into a government loan with a fixed interest rate of 4%. The risk is very low, but the revenue of that loan is also low. Perhaps an investment in the animal feed sector brings a return of 12%, but the risk to achieve this is obviously greater. The financial side of a project consists of the investment (capital expenditure; Capex), revenue, operational costs (operational expenditure; Opex) and rest value or re-investments

Havelet Finance Limited offers financing for large projects alongside project financing schemes for feed mill plant constructions and industrial facilities.

Characteristics and Stages involved in Feed Mill Plant Project Financing;

Project financing is a loan structure that relies primarily on the project’s cash flow for repayment, with the project’s assets, rights, and interests. This is based on mostly the cash that would be generated from feed Mill Plants.

Unlike other forms of financing, Project financing houses all methods of project developments and facilities.

Project financing of feed mill plants consists of the following stages:

1 Feed milling Business Plan

Having a business plan is extremely important before even starting your feed mill business. It is very unlikely that you will have all the information before you start, so you will need to make changes as you go along. So, if you are considering building a feed mill, you need to first draft a business plan. This is good practice as it will help you organize your thoughts, set goals and plan how you will achieve them. It will also help you show your investors how you will run your business and can help to secure funding.

You need to make sure that your business plan is well-written and that it covers all aspects of your feed mill. It should have details of your target customers, your products, your proposed pricing, your proposed marketing strategies, and other important details. The business plan should convince the relevant authorities that you can run a successful feed mill.

2 location:

The location you choose to site your feed mill, especially if it is for commercial purposes, is very important to its success and profitability. If you are building the feed mill for your farm, it is very easy and you don’t need to stress yourself choosing a location. Just find a good place on your farm that is not close to the pens, incinerator or farm house.

Please take note that it may be better to construct your feed mill near the farmers rather than setting up in town and having to transport the feed all over. On the other hand, if you want to sell your feed to the city, it may be better to have your feed store in the city.

Acquire the land

When you see a suitable location that meets most of the requirements listed above, make sure you find out the land you want to acquire has no ownership issues or any other legal issues. If there are none, you should proceed to pay for the land at the agreed price. If possible, buy as many acreages as you can afford to allow you to easily expand if necessary in the future, especially if you need more stores or warehouses.

licenses to operate a feed mill

In your country, there are likely to be quite a few regulations to follow before you can build a feed mill or start feed milling operations. One of the most important rules is to get approval from the relevant authorities and government ministries or departments. You will usually be required to have certain documents before your feed mill can be approved to operate.

Draw the feed mill architectural plans and have them approved

After you get approval from the relevant authorities, you can start drawing the architectural plans for your feed mill. These plans will be according to the regulations in your country, and you can get help from experts if you are not sure about the exact rules and regulations.

Even before your feed mill is built, a professional must be involved in drawing up the architectural plans. The plans will include the building of the feed mill, the machinery and equipment that will be installed, and the layout of the rooms and shops. However, it will be your responsibility to ensure that the approved plans are adhered to.

Project Implementations

This includes the creation of a project company (SPV), tenders, procurement of equipment and execution of works.

Challenges of Feed mill Plant

  1. Insufficient capital to run the feed mill.
  2. Poor electricity supply in some countries, hence more money is spent on alternative energy source like a diesel generator.
  3. Difficulty in getting raw materials when they are needed.
  4. Rising costs for raw materials such as corn and soybeans.
  5. Changing weather patterns that can affect crop yields.
  6. Poor quality ingredients that pose threat to brand image and reputation.
  7. Managing operations, optimizing production and quality control.
  8. Finding new sources for raw materials especially maize or corn.
  9. Maintaining good relationships with suppliers and customers amidst stiff competition from other feed mills.
  10. Due to the high capital requirements, most small farmers do not have the means to start a feed mill.
  11. Investing in a feed mill is equivalent to investing in a factory, where the farmer has to buy expensive machinery and invest a considerable amount in the research and development of the feed.

A lot of people are interested in starting a feed mill are concerned about the financial requirements. But don’t let this stop you! The feed milling business is one of the few agricultural industries that have yet to be disrupted by the rise of globalization and conglomerates, so there’s plenty of opportunity for entrepreneurs. This being said, you can secure funding for construction of Feed mill plants though commercial banks, other means includes crowfunding, Angel investors and investment funds and companies, pension funds and other institutional investors, leasing companies and other financial, credit and investment institutions can act as financial participants in the implementation of large investment projects.

Automation and technology are also important trends in the feed mill business. They allow for higher processing capacity, more efficient processing of more products per hour, and a higher consistency of quality.

Havelet finance Limited over the years are experienced international loans and project financing mechanisms. We are ready to offer you funding on low and flexible interest rate and as well, guarantee you a maximum support to your project from scratch.


Email: credit@havelet-finance.com

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