As a farmer, you know that having a reliable and consistent source of capital is key to the success of your operation. That’s why it’s important to make sure your farm loan application is as strong as possible. There are a number of things you can do to strengthen your farm loan application and increase your chances of getting approved for the financing you need. In this blog post, we’ll take a look at a few of the most important steps you can take.
Is it Hard to Get a Farm Loan?
One of the first questions many farmers have is whether or not it’s hard to get a farm loan. The answer to this question depends on a number of factors, including the size and type of loan you’re looking for, your credit history, and the strength of your financials. In general, however, it can be more difficult to get a farm loan than it is to get a loan for other types of businesses. This is because banks and other lenders perceive farms as higher-risk investments.
There are state and federal programs that offer assistance to farmers who are looking for loans. The United States Department of Agriculture (USDA), for example, is one of the most popular sources of farm loans. The USDA offers a number of different loan programs, each of which has its own set of eligibility requirements. However, many of these programs have strict requirements and restrictions that can make it hard to get the financing you need. So, to help you out, we’ve put together a list of four effective steps you can take to strengthen your farm loan application.
Steps You Can Follow to Strengthen Your Farm Loan Application
If you’re looking for ways to strengthen your farm loan application, here are a few steps you can take:
Step 1: Specify Your Goals
First and foremost, you must set and specify your goals in the first place. No lender will want to offer you money for a farm if you haven’t chosen how you’re going to run it yet. In order for the lender to understand your vision, you must provide concrete, attainable goals. Your farm business plan, which is still another crucial component of successfully securing farm funding, should include these objectives.
Your objectives provide the lender with a sense of what you have in mind for the farm. Are you going to put a lot of effort into it, or are you just going to give it a go and see if anything sticks? When the lender can see your goals in writing, it will be easier for them to assess your situation and determine whether you are a good risk or not.
The more specific and realistic your goals are, the more likely you are to get the loan you’re asking for.
Step 2: Demonstrate How Your Crops Meet a Need
Lenders are hesitant to lend money to a single farm. They wish to lend money to a farm so that it can meet a need. This means that you must demonstrate a market for the crops you plan to raise. This needs to be a key component of your marketing strategy. Show the lender that you completed your homework and are aware of the market demand in your area for the crops you intend to grow.
Once you’ve decided on the crops you’ll grow, you need to demonstrate how you’ll get those crops to the clients who need them. What is your planned usage for your advertising budget? The lender wants to examine these in order to predict what will happen in the future. Do you already have a list of places or clients who are waiting for the crops you have to offer, or will you have a lot of crops and no one to sell them to? The more you can show that you have a plan to get your crops in the hands of people who need them, the better.
Step 3: Identify a Niche and Discuss It
If you identify a niche, your application will be at its strongest. Due to the limited availability of herbs in many supermarkets, many beginning growers start with them. Herbs produced nearby are significantly more affordable for retailers and customers, which might provide you with the competitive advantage you need.
If you don’t intend to produce and sell herbs, research the underserved market in your area and pitch it to the lender. Present the lender with evidence of the local need before outlining your approach to address it. It’s easier to get loans for farms that have a specific purpose and market, so the more you can show the lender that you know what you’re doing, it will increase your chances of getting the loan you need.
Step 4: Get Your Finances in Order
No matter how strong your farm loan application is, it will be for naught if your financial situation is not in order. You must prove to the lender that you have the means to survive if you want the loan; but, since you are applying, it is evident that you need the money. They want to know that you have the financial capacity to survive in addition to being able to repay the loan. You must have all of these things documented to show the lender, regardless of whether you have savings saved up on your own or support from family or friends.
Make a balance sheet that details your assets and obligations, as well as a P&L that details your profit and loss for the past year. Your application will be strengthened if you can demonstrate to the lender that you have done any study or planning.
Keep in mind that the lender is assuming a risk by lending to you. You must make them completely convinced that you are a good risk. You can only accomplish this by demonstrating that you have done your study and possess the necessary skills. To be a successful farmer, you need to have a lot of financial acumen on the back end in addition to field expertise.
Easier Option for Applying for a Farm Loan
While government-backed loans can be a good option for some farmers, they may not be the best choice for everyone. The good news is that there are a number of other options available for farmers who are looking for financing. One option is to work with a farm lending institution. These institutions are specifically designed to provide financing to farmers and agriculture businesses. They typically have a better understanding of the unique needs of farmers and can offer more flexible terms and conditions than traditional banks.
Here at Farm Plus Financial, we specialize in farm loans and understand the unique needs of farmers. We offer a variety of different loan programs, each of which is designed to meet the specific needs of our clients. Regardless of the state that you’re in, we have a loan program that can help you get the financing you need to grow your business. Contact us today to learn more about our farm loans and how we can help you grow your business.