How Do You Know if farm financing is Right for You?
- A good credit score.
- A low debt ratio.
- 10+ years in the farming industry
- Business plan showing how you will use the money, how it will help you to turn a profit, and how you will be able to pay the money back.
- Assets that match or surpass the value of the loan.
While all lenders are going to look at these compensating factors differently, being able to present a trustworthy business profile is key to securing a loan with good rates and terms.
It is also important to shop around when looking for a loan as well. One lender might not see your compensating factors as valid, while others might. Shopping around and getting multiple quotes is key to getting the best rates and terms.
Having poor credit should not deter you from searching out financing. As mentioned above, there are many other factors that lenders will take into account when determining your eligibility.
If you are on the fence about whether or not farm financing is for you, here a just a few ways that additional funds can help you to recover from a bump in the road, or allow you to expand your business indefinitely.
New machinery and equipment: As anybody who has been close to a farm knows, agriculture requires a lot of machinery and equipment; none of which runs cheap. Updating your tractor, harvester, fencing or even your workforce can make operations move more efficiently and result in more profits. A loan such as a business line of credit can also be held in case of equipment failure.
To secure a loan with a traditional lender you will usually have to demonstrate years of profit/loss accounts, have valuable assets that you can put up against the loan, and have a credit score that is improving
Upgrading Your Systems: Pennies saved can equal thousands made. Upgrading agriculture systems such as your field irrigation can cost a lot upfront, but the long term savings can make your business more profitable once the loan has been paid. Read more