Getting your business up and running is no easy feat, and those in the agriculture business know this quite well. Costs start to add up fast, and before you know it, you’re searching for different ways to finance your business. This is when agricultural loans come into play.
Agricultural loans are loans that can be used by the farmers as a support when launching their business. They can also be used for other purposes such as covering operating costs or the costs of expanding a business. Of course, how you use the funds from your loan will depend on your individual business needs. One thing’s for certain – an agricultural loan can help you grow as a farmer in more ways than one.
Covering land costs and making land improvements
As a farmer, you may be thinking about leasing or purchasing farmland. Now this is a spending decision that’s one of the most important and most complex ones you’ll need to make. You’ll also need to figure out how much land you need and what type it should be. This will largely depend on the type of farming you plan on using it for. If you do decide to purchase land, you’ll need to put up something as collateral. This will be your way of guaranteeing your bank that you’ll repay the loan.
Speaking of land, another way you can use your agricultural loan is to make land improvements. Land and infrastructure often require repairs and upgrades, some of which can get quite expensive. By using the loan for land maintenance and upkeep, you can boost your business’ efficiency, farm’s value, and product quality.
Refinancing an outstanding agricultural loan
Sometimes, farmers will take out an agricultural loan in order to pay off an existing loan. This process is called refinancing, and it can be beneficial for farmers for more than one reason. For starters, you can ensure more favorable terms such as lower interest rates, lower monthly payments, and more flexible payments. That way, you can get a more affordable loan, which could save you thousands of dollars in the long run.
Thanks to a variety of agricultural loans and financing options available, refinancing existing or previous loans is easier than ever. It’d be best if you’d consult with a financial advisor before seeking refinancing. Generally speaking, if the costs related to refinancing are lower than the interest savings, you’re making the right decision.
Purchasing specialized farm equipment and supplies
Just like any other industry, agriculture requires specialized equipment. In order for a farmer to run their business successfully, they need to invest in high-quality, long-lasting equipment. This includes everything from tractors and combines to fertilizer spreaders and irrigation systems. The quality of the equipment you invest in will directly affect your business efficiency. The thing is, specialized farm equipment costs a pretty penny. This is why you want to price out everything so you can make sure that you can repay the equipment.
Aside from harvesting tools and other essential equipment, you’ll also need to factor in the cost of supplies. You can use your agricultural loan to cover these costs as well. That said, be careful when planning your loan amount. You may need to take out enough money to pay for the operating expenses until the harvest time which is when you’ll start generating revenue.
Covering marketing costs
Whether you’re just starting out or have been in the agricultural business for a while now, boosting your visibility is a must. You want to get your products visible to the vendors and the public. For that to happen, you’ll need to identify the best marketing channels and invest in them. You can rely on everything from online marketing to trade journals for your marketing campaigns.
The thing is, marketing expenses add up pretty quickly, and agricultural loans can be real life savers. Use yours to cover the cost of everything from websites to PR to logos, and you’ll have no trouble getting your business out there.
Surviving a lean season
There’s no doubt that agriculture can be a lucrative business, but the thing is – it’s also very unpredictable. It has its ups and downs, and protecting yourself and your business from these fluctuations is imperative. But because planning for each and every eventuality is impossible, sometimes, farmers are often caught off guard.
When a cash infusion becomes top priority, many farmers decide to take out an agricultural loan. Not only is this one of the best ways to help them weather a storm, but it also helps farmers get back on their feet. That way, they can survive a lean season, which is often a result of changing commodity prices as well as year-to-year variations in crops and livestock.
Wrapping up
Getting started in the world of farming can seem overwhelming due to how much it costs to get your business up and running. By taking out an agricultural loan, you can use the funds you get as a stepping stone that can help propel your business to success.
