FONDO NACIONAL DE FINANCIAMIENTO FORESTAL

FORESTRY CREDIT
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The Credit Program finances activities such as: nurseries, reforestation, forest management, technological improvement in the exploitation and industrialization of forestry resources and work capital, among others.

General Characteristics

The following are the characteristics of the beneficiaries who opt for FONAFIFO’s financing processes:

	They must be legally constituted and recognized in Costa Rica, according to existing regulations, able to exercise rights and acquire obligations.
	They must have technical, administrative and accounting systems that are acceptable according to the criteria of the Trustee or receive the technical assistance that makes it possible to comply with this requirement.
	Be willing to accept and apply the recommendations of a technical and administrative nature suggested by FONAFIFO’s Credit Department and Trustee.

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Special Characteristics of those Subject to Credit

The following are some of the Special Characteristics of those Subject to Credit, according to Trust Funds.


		Characteristics
	medicoTrust Fund 550, 544 (sub- account 3) and 340	In order to be considered a small and medium producer, the beneficiary must possess a property of up to 500 hectares and an annual net income equivalent to a maximum of US$29.000, as a result of forestry activities. The small and medium forestry industry is also subject to credit according to the reference information presented in the following table.
		Classification of the industries according to size
		Type of company	Annual Gross Sales US$	Annual Gross Sales US$
		Forestry micro-company	Up to 85.000	From 1 - 5
		Small Forestry company	Up to 500.000	From 6 - 30
		Medium Company	Up to 1.000.000	From 31- 80
	Trust Fund 551	Physical persons or corporations, for profit or not, legally constituted and with a mostly national social capital are subject to credit under this Trust Fund. This trust fund excludes the financing of forestry industrial activities, based on what is stipulated in clause IV of Chapter III of the Credit Regulation of the Trust Fund Contract.
	Trust Fund 551 Addendum	The beneficiaries shall be organizations of small and medium producers according to the criteria defined by FONAFIFO’s Board of Directors.

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Areas of Interest

Credit Characteristics by Activities, Interest Rate and Terms


		Characteristic		Description
		Activity		Establishment of forestry plantations
		Items to finance		Infrastructure, equipment and tools, materials and goods reimbursement of pre-investment expenses for the preparation of technical and financial feasibility studies and any other type of infrastructure and machinery, duly justified. All investments can be applied for a maximum of five years through annual disbursements. The amount per hectare considered by FONAFIFO’s Credit Department will be financed according to its own studies and statistics
		Annual interest rate		For micro, small and medium companies: Basic borrowing rate, the aforementioned rate cannot be greater than 18%.
		Terms		Depends on the cash flow and the growth of the species. There could be a grace period equivalent up to the species' turn

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Credit Characteristics by Activities, Interest Rate and Terms


		Characteristic		Description
		Activity		Management of forestry plantations
		Items to finance		The following items can be financed: equipment and tools, materials and goods, labor, technical assistance for pruning, thinning and other forestry treatments
		Annual interest rate		For micro, small and medium companies: Basic borrowing rate. In either case, the aforementioned rate cannot be less than 16% or greater than 22%.
		Terms		Depending on the cash flow and the cutting term. There could be a grace period equivalent up to the species' turn

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Credit Characteristics by Activities, Interest Rate and Terms


		Characteristic		Description
		Activity		Agroforestry
		Items to finance		Infrastructure, equipment and tools, materials and goods of pre-investment expenses for the preparation of technical and financial feasibility studies and any other type of infrastructure and machinery, duly justified by the forestry component.
		Annual interest rate		For micro, small and medium companies: Basic borrowing rate. In either case, the aforementioned rate cannot be less than 16% or greater than 22%
		Terms		Depending on the cash flow and the cutting term. There could be a grace period equivalent up to the species' turn

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Credit Characteristics by Activities, Interest Rate and Terms


		Characteristic		Description
		Activity		Forestry Nurseries
		Items to finance		Infrastructure, equipment and tools, materials and goods, labor, administration, technical assistance, reimbursement of pre-investment expenses for the preparation of technical and financial feasibility studies. Furthermore, the financing of capital investments and medium-term operation will also be considered when duly justified (storage warehouses, germinators, pipes, watering equipment). A maximum of 80% of the investment will be financed as determined by the technical analysis
		Annual interest rate		For micro companies, the aforementioned rate cannot be less than 16% or greater than 22%. For small and medium companies: Basic borrowing rate. The aforementioned rate cannot be less than 18% or greater than 22%
		Terms		Up to three years

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Credit Characteristics by Activities, Interest Rate and Terms


		Characteristic		Description
		Activity		Natural Forest Management
		Items to finance		Those forestry activities intended to guarantee the production of wood. The capital investment can be financed, such as: infrastructure development, equipment and tools, materials and goods, labor, administration, technical assistance, reimbursement of pre-investment expenses for the preparation of technical and financial feasibility studies. The financing of self-activities for the use of natural forests such as cut and extraction are not considered, which can be financed through the work capital credit line
		Annual interest rate		For micro companies, the aforementioned rate cannot be less than 16% or greater than 22%. For small and medium companies: Basic borrowing rate. The aforementioned rate cannot be less than 18% or greater than 22%.
		Terms		Depends on the cash flow and cutting cycle

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Credit Characteristics by Activities, Interest Rate and Terms


		Characteristic		Description
		Activity		Interim financing
		Items to finance		The first year investment of the forestry projects that are approved to benefit from the Environmental Services Payment. The following years could be financed if duly justified; however, the percentage to finance for any of these cases including CAF, cannot exceed eighty-five percent of the amount to be received
		Annual interest rate		For micro companies, the aforementioned rate cannot be less than 16% or greater than 22%. For small and medium companies: Basic borrowing rate. The aforementioned rate cannot be less than 18% or greater than 22%
		Terms		Up to 12 months.

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Credit Characteristics by Activities, Interest Rate and Terms


		Characteristic		Description
		Activity		Forestry Industry
		Items to finance		Investments for the technological improvement of the forestry industry, including driers and equipment for wood's secondary industry. Furthermore, expenses for labor, machinery equipment including mobile extraction equipment and transportation, equipment for primary and secondary processing and its installation, marketing of wood products and reimbursement of pre-investment expenses for the preparation of technical and financial feasibility studies. A maximum of 80% of the investment that the analysis determines will be financed, which forces the borrower to have a counterpart fund and in that manner, share in the investment risk, generating a greater commitment with the project's execution. Trust Fund 551 is exempt of this financing line since it is not within the items to be financed as established by clause IV of Chapter III of the Credit Regulation of the contract of the aforementioned trust fund
		Annual interest rate		For micro companies, basic borrowing rate. The aforementioned rate cannot be less than 16% or greater than 25%. For small and medium companies: Basic borrowing rate. The aforementioned rate cannot be less than 18% or greater than 25%
		Terms		Up to seven years, depending on the cash flow.

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Credit Characteristics by Activities, Interest Rate and Terms


		Characteristic		Description
		Activity		IIntegral Projects
		Items to finance		Different forestry activities that combine a horizontal and vertical production process to obtain intermediate and final products.
		Annual interest rate		Defined by the Board of Directors and/or the Credit Committee.
		Terms		Up to twelve months

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Fields of interest for financing and characteristics of de credits by activity


		Characteristic		Description
		Activity		Management plans and feasibility studies (forest and plantations)
		Items to be finenced		The elaboration of studies of forest management and forest plantation plans as well as other feasibility studies that need to be presented to the State's Forestry Administration and other entities
		Annual interest rate		For micro companies, basic borrowing rate. The aforementioned rate cannot be less than 16% or greater than 22%
		Duration		Up to twelve months

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Fields of interest for financing and characteristics of de credits by activity


		Characteristic		Description
		Activity		Working capital
		Items to be finenced		Raw materials and/or finished product, industrialized as a result of reforestation, labor, administration costs and technical assistance, operational costs generated in the process, marketing, spares and others, duly justified
		Annual interest rate		For micro companies, basic borrowing rate. The aforementioned rate cannot be less than 16% or greater than 22%. For small and medium companies: Basic borrowing rate. The aforementioned rate cannot be less than 18% or greater than 22%.
		Duration		Up to twelve months

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Application of Clean Technology

The Application of Clean technology and generation of innovative products from the wood grown in plantations
Forestry extraction with animal force, the use of biomass in the generation of power, the innovative use of the residues of forestry production in its different stages as well as other similar actions are considered application of clean technology. These activities are favored with an interest rate equivalent to a Basic Borrowing rate of no less than 16% and no greater than 22%. The same interest rate will be applied to those projects that involve the development of innovative products using wood from plantations. In both cases, the requestor must fully justify why his or her project qualifies for these benefits; the request will be evaluated by FONAFIFO’s Credit Department who will recommend the project to the Internal Committee or the Board of Directors, depending on the application of said benefit.

Guarantees

The credits must be guaranteed through mortgage, collateral or trust guarantees, according to the following criteria:


	Guaranties		Description
	Mortgage Security		This type of guarantee demonstrates, in the majority of cases, great solidity and backing; however, its value of responsibility doesn’t always have to be the basis for credit approval since there could be technical, legal or physical limitations, which could go against the desire for good and become a covered purchase. The percentage of maximum responsibility, in the case of properties, it is 80%, which could be lower in high-risk credits .
	Collateral		The securities must be accepted. They are preferably used as collateral or complementary guarantees. Similar to the mortgage guarantee, the value of responsibility must be handled independently of the amount to be guaranteed. This guarantee policy is applied in this manner because there are goods whose depreciation is accelerated and in a very short time, the value of responsibility given can be found above its recovery value even when the credit is not due. Given the aforementioned observation, the responsibility of a guaranteed good cannot be greater than 65% of its value and in its allocation, the level of depreciation to which