Monday, July 07, 2008

Business Revelation

If you have been a frequent visitor to this site, then you know mostly what this post is about.

Here it is:

1. Years ago I was subsisting on my 15 and 30 salary - money were gone even before the payday comes. It was a trap, a cycle with a no way out. I was afraid, indeed, fear was my greatest motivator, that I would reach 40 or 50 years old still trapped on a 15th and 30th pay day schemes.

2. So I took the plunge. I resigned. Search for a job. Worked in KSA for two years, and save, and save every Riyal that I could.

3. Use the money (savings from KSA) to buy very cheap agricultural lands. I lend money to farmers at below market rates. They approach me when I was looking for agri lands for sale. The lending thing grew.

4. The lending thing - today - is my crown jewel.

5. I mortgage my acquired lands in coops and banks to raise capital. I leveraged it, which means, I acquired money from coops and banks at 12% p.a., and loan the money to farmers, payable in unhusked rice (they mortgaged the land to me and they farm it and pay me a fixed number of sacks as rental every cropping). The cycle which typically occur twice a year is - rentals are collected every cropping, loans are released during planting season.

6. When I started the agri-lending business the buying rate for unhusked rice was 5.50 pesos per kilo. Today it is 17.00 pesos per kilo. Inflation trippled my income! Recently the farmers income shoot up, and so was mine.

7. On average, this business is growing 50% a year (including the spike caused by increased rice prices that started 2 to 3 months ago).


The buffer:

My coops and bank loans need to be paid on a monthly basis.I set aside a certain amount of money every cropping to enable me to pay at least 2 or 3 monthly dues. The rest are covered with the daily rentals of my vehicles (mutlicabs and tricycles, my rice stores, my online income, and others). I never miss my payments (credit rating! hehehe)

I always pay down my loans to 50% every cropping so I can apply for a reloan - which I release to farmers during planting season.

This means - I use the farmers money to pay my loans. And I use the bank and coop money to provide loans to farmers. The interest differential is mine.

Sa gitna lang ako - my lands, and my kakapirangot na capital. Yan...lang.


Now..I am not working anymore....mahigit ng two years.

I know this could never lasts. Good things never do. That is why I am diversifying.