Grow Your Agriculture Business With Farm Loan
Are you into agriculture business? If yes, you already know the blessings and perils of it. While it can be a pretty profitable venture, not to mention amazingly satisfying too; the uncertainties of Mother Nature often makes it harder for you to plan your finances. Be it buying a piece of farming land or purchasing some essential equipment, often the seasonal nature of the business becomes a hindrance for your growth.
Well, it does not have to be so!
Growing your farming business is really easy with the appropriate agri loan. While there are a number of lenders who offer farm loan today, choosing the one that is best for your business is easier said than done.
But, before we dive deep into how you can utilize an agri loan to grow your farm or what features you need to look for in your farm loan, let us get a better picture on what agriculture loan is.
What is Agri Loan?
Agri loans or farm loans are aimed at offering financial support to farmers, agriculture businesses and rural communities. These loans can be used to finance various requirements of a farming business. Whether you are looking at growing your agriculture business or willing to start a new one, an agriculture loan is the best bet for any farmer for sure. While the basic concept of the loans are quite similar to that of any other type of loan, these loans are often tailored to fit the seasonal nature of agri industry.
How to Use an Agri Loan for Growing Your Farming Business?
In most cases, growing a farming business calls for a substantial amount of capital. But, that is no reason to hold back on your dreams! Here’s how you can grow your agri business with a farm loan.
Purchase or Lease of New Farming Land
The first requirement of any agriculture business is land. Whether you are a new farmer looking at your first piece of real estate or a seasoned businessman gearing up to grow his business; you can avail an agri loan to purchase or lease new farming land.
Both traditional banks and online lenders offer farming loan for this purpose. However, considering the uncertainties of the industry in general, most traditional lenders are likely to ask for a high collateral. This is a problem area for many farmers, especially the new ones. Here, applying with an online lender and availing peer to peer lending can be a good solution.
Purchase or Repair of Farming Equipment
Running a farm without specialized equipment is not only difficult, but also more expensive. With specialized equipment in place, you can reduce manual labour significantly and improve productivity many times over. So, if you are looking at growing your farm, it is essential to invest in specialized equipment, such as tractors, grain baggers, shredders etc.
However, quality farming equipment does not come cheap. Here, opting for an agri loan is a great choice. Before you apply for the loan, make sure to do the proper research about the pricing of the equipment you need, the running cost for the same, any maintenance cost that you may have to bear etc. This way, you won’t over or underestimate the amount of money you need.
While you can avail a farm loan for purchasing new equipment, you can sought one out for repairing your old ones too. Simply make sure to go with the right lender and you can boost your farm production with the right tools.
Refinancing an Older Loan
If you already have a farm loan with high interest rate, refinancing it with a lower-interest loan can significantly reduce your financial burden and help you grow your business. However, this one needs thorough analysis and understanding.
Once you refinance your older loan, you’ll still have an outstanding loan to pay back. Plus, you’ll have to bear the refinancing cost as well. So, going for it makes no sense, unless you save significantly on the payable interest. Therefore, checking the options out with a seasoned financial adviser is for the best.
Recovery Cost after a Natural Disaster
Natural disasters are difficult on everyone. But, agriculture businesses are especially vulnerable to Mother Nature. So, if you have recently faced a natural disaster such as storm, flood, fire, insect etc, then opting for a farm loan makes perfect sense. Moreover, the USDA Farm Service Agency (FSA) runs a program that helps farmers get back on solid footing after any such natural disaster.
Whether you want to rebuild or need to carry out a lot of repairing work or are short on operation cost after a natural calamity, opting for a farm loan or FAS loan is the best option.
Covering Operation Cost
Operating a farm needs a lot of capital. Be it purchasing the seeds, fertilizers etc or paying your employees, an agriculture business like any other has a number of spending areas throughout the year. However, the seasonal nature of the business combined with its susceptibility to the whims of nature, can make it difficult for you to cover the operation cost sometimes.
Here, agri loan can come to your rescue. Most lenders, both traditional and online offer agriculture loan that you can spend to cover the operation cost of your farm.
Farming is different than other businesses and so are farm loans. So, while applying for a farm loan, there’s one special point that you need to keep in mind.
Farming is mostly seasonal. This means, your earnings come at yearly, half-yearly or seasonal basis; and not monthly. Therefore, looking for a loan that offers a flexible repayment option where you can pay only the interest together with a small portion of the loan amount on monthly basis and the larger sum at the end of the season (when you earn your revenue) is a great choice. Today, most traditional and online lenders offer agri loans with this kind of flexibility. Do your due diligence and you’ll be soon growing your farm!