Today’s farmers face an array of hurdles. At this point, the cost of everything from land and equipment to seed and fertilizer is soaring. That means simply starting a farm or keeping it operating can be an insurmountable expense. To make matters more complicated, fluctuating market prices, unexpected inclement weather, and many other issues can make a farmer’s income unpredictable. On top of that, farmers are under increasing pressure to increase their crop yields while also using sustainable practices and implementing more environmentally friendly pest control measures among other considerations.
Understanding Agricultural Financing Options
For most people, getting the funds needed to start a farm alone can be a significant hurdle. Maintaining the capital to keep it running can be difficult as well. That’s where agricultural financing options come into play. Several solutions are available to help modern farmers whether they’re just getting started in the agricultural industry or expanding their operations and branching into new segments of the market. Different types of loans are offered through companies like Rabo AgriFinance to meet farmers’ unique and varying needs.
- Agricultural Real Estate Loans – These loans are meant for purchasing farmland and building structures like barns, storage sheds, and fencing.
- Farm Ownership Loans – Farmers can use farm ownership loans to purchase farmland, equipment, and other essentials or expand or improve upon what they already own.
- Farm Improvement Loans – If a farmer needs to upgrade his or her farm, equipment, or systems, a farm improvement loan may be the best option.
- Equipment Loans – For those who need to purchase machinery, like tractors, harvesters, trucks, and trailers, equipment loans are available.
These are only a few of the agricultural loans at farmers’ disposal. Many other options are also available from shorter term operating loans for smaller expenses to larger agribusiness loans for bigger, more established operations. Working with an agricultural loan specialist can help ensure you choose the right loan for your needs and get the best interest rates among other benefits.
Creating a Business Plan Is Essential
Running a successful farm isn’t only about growing crops. It’s a business, and like any other, it requires planning and significant knowledge of how to manage a company and its finances. If you’re looking for an agricultural loan, you may need to create a business plan to present to potential lenders. Even if they don’t specifically ask to see your business plan, having one in place will help you to more effectively manage paying back the loan in addition to all your other expenses.
Building Your Credit
Many agricultural loan providers have more lenient requirements than other lenders. They understand the unique challenges facing farmers and the potentially unstable nature of their income. They’re also well aware of just how difficult starting a farm and reaching the point where it turns a profit can be. Still, your credit score will still be important for qualifying for an agricultural loan. If possible, take measures to improve your credit score before applying for the loan. It may increase your borrowing power and qualify you for lower interest rates along with certain other benefits.
Getting Funding for Your Farm
Running a successful farm means covering a seemingly endless list of details. It also requires business sense and funding. Agricultural loans can give you the funding you need to cover all the important details. Different types of agricultural loans are available for various purposes. Having a business plan in place, building your credit before applying for a loan, and working with someone who specializes in agricultural loans can make a world of difference when it comes to getting the funding you need.
