ProducePay seeks to increase financing of growers
ProducePay has much more money to finance growers sending produce to U.S. markets.
Los Angeles, Calif.-based ProducePay has secured a $205 million debt facility from Coventure and TCM Capital.
The funding news follows on the heels of ProducePay’s $14 million 2018 Series B equity funding round, which was led by Anterra Capital, according to a news release.
“Because the fresh produce market is incredibly fragmented, and because traditional financing is costly and time-consuming, it has been difficult for farmers to make the investments required to grow,” Ali Hamed, founder at CoVenture, said in the release. “But ProducePay, which was co-founded by a family member of a leading Mexican produce farmer, has proven that when you combine a deep understanding of the market, a meaningful connection to growers, and significant investment in data and technology, big change is possible.”
The financing, said ProducePay founder and CEO Pablo Borquez Schwarzbeck, will allow the company to invest more heavily with farmers in Latin America and the U.S. in coming years.
Founded in 2015, he said ProducePay provides financing for farmers’ preseason and in-season operations through advance payments when the company pre-purchases product. ProducePay takes title to produce from its growers as the produce moves into to the supply chain but does not take physical possession of the produce or market the produce. ProducePay protects the Perishable Agricultural Commodities Act trust rights for growers, Schwarzbeck said.
The company mostly funds growers in Mexico and other Latin American countries, but Schwarzbeck said Dec. 9 that 25% of ProducePay funding is serving U.S. growers.
The company earlier this year introduced ProducePay Insights, a market reporting and analysis web tool on the ProducePay website that tracks price, weather and shipment reports on a wide range of fresh produce commodities, he said. The web tool, with a free version and a premium version, has 3,000 active weekly users, Schwarzbeck said.
With the increased investment in the company, Schwarzbeck said the company will be able to help more growers in Mexico, Guatemala, Peru, Chile and the U.S.
The short-term funding helps growers invest in their business and offers more responsive solutions than banks, which can take months or even as much as a year to make a lending decision. In contrast, dozen of analysts at ProducePay can make funding decisions in a few weeks.
“We are geared to be able to evaluate any farming opportunity and decide whether we want to participate in that crop within three weeks, regardless of whether it’s a $200,000 investment or a $10 million investment,” Schwarzbeck said.
The $200 million in new funding will help ProducePay serve growers in those five counties, the primary sources of supply for the U.S. market.
Since its founding in 2015, ProducePay helped growers sell more than $1.5 billion in produce, and $750 million in 2019 alone, according to the company.
Schwarzbeck said ProducePay has helped finance about 400 growers this year, of which about 75% are in Latin America. The average annual sales for those growers is about $3 million each, he said.
This year, ProducePay is enabling growers with about $1 billion in sales. With the new funding facility, Schwarzbeck believes Produce Pay can help its growers reach $4 billion in transactions by 2022.
Schwarzbeck said the company is betting heavily on the continued growth in Latin America produce exports.
“Our own research estimates that the industry produce consumption in the United States is growing by 4% annually, whereas production in Latin America of produce destined to the U.S. is growing by 7% annually,” he said. That means, he said, the share of Latin American produce of total U.S. consumption will continue to grow.
The goal of ProducePay, he said, is to become the foremost private funding source of capital to fresh produce growers in the region.