SAO PAULO (Reuters) -Reforestation startup Mombak has secured 100 million reais ($17.8 million) in a deal with Santander Brasil and Brazilian development bank BNDES, it said on Monday, eyeing rapid growth in the carbon removal market.

Mombak, which buys degraded land from farmers and ranchers or partners with them to replant native species in the Amazon rainforest, will be the first to fund a reforestation project with the backing of the Brazil's "New Climate Fund".

Brazil's government launched the 10 billion-real initiative in 2023 to finance climate-related projects. Santander is serving as financial intermediary for the deal, underscoring growing interest from private lenders in the nascent sector.

BNDES had offered a credit line for up to 160 million reais to Mombak in August, but the startup needed a financial agent providing required guarantees to access the capital.

"There is a challenge between getting this approval and actually being able to use the capital. We are reaching a very important milestone," Mombak co-founder Gabriel Silva said in an interview.

Mombak currently has 45,000 acres under management, an area three times the size of Manhattan, and by June expects to have planted 8 million trees in the world's largest rainforest.

By turning degraded land into forests, the company is working to generate "carbon credits" that companies can buy to offset their greenhouse gas emissions.

Mombak, which has deals with buyers such as Microsoft ( MSFT ), Google and McLaren, has inked $150 million worth of carbon removal offtake contracts - a figure it expects to triple or quadruple this year, CEO Peter Fernandez said.

Some firms in Brazil's nascent carbon market have complained of difficulty getting loans to reduce capital costs and finance operations, as many investors still see it as risky.

BNDES director Tereza Campello said the Mombak deal should set a precedent helping to ease some of those concerns. The bank sees Brazil, home to nearly 60% of the Amazon rainforest, as well positioned to be a leading player in carbon offset markets.

"This is the role of a development bank. We are taking the initiative," Campello said in an interview. "This deal shows the market is viable and that not only BNDES believes in it, but other financial institutions too."

Santander sustainability head Leonardo Fleck said fresh funding reflected an increasingly established market in Brazil.

"Capital is flowing, companies are planting and getting offtake contracts with large global firms. I see it a lot like a puzzle - you start to fit the pieces together."

($1 = 5.6321 reais)