If you own a farm or would like to start one, you may indeed need some financing at one point. It might be to expand your farm, buy more machinery, or cater for day-to-day expenses. A farmer loan is one of the best methods to finance such activities. A farmer loan can be obtained from a bank, an agricultural lender, or the United States Department of Agriculture. However, getting a loan from a bank can be troublesome for farmers. But you can look for agricultural lenders who understand the industry better. Nevertheless, the loan application process can be challenging for an applicant. Therefore, we will explain the most important steps that smoothen the loan application process.
Review Eligibility Requirements
The first step is to check if you are eligible for a farmer loan. Here are some of the general requirements:
Be a United States citizen, non-citizen national, or legal alien of the United States.
A good credit history.
The legal ability to accept responsibility for the loan obligation.
Not being ineligible due to disqualification resulting from a federal crop insurance violation.
Not having federal or state convictions for planting, cultivating, growing, producing, harvesting storing, trafficking, or possession of controlled substances.
Have sufficient managerial ability to assure a reasonable expectation of repayment.
Most of the time you will find that you meet these requirements. But it is good to be informed just in case. However, there are requirements you might need to discuss with a loan officer in addition to these.
Partner with a Loan Officer
Most agricultural lenders have loan officers who help farmers during the loan application process. A loan officer will provide supervision throughout the life of the loan and give feedback suggestions on your business operating plan. They also work with you to develop opportunities that build your business and work with you on phone, email, or calls. Remember, as a farm loan applicant, you need professional guidance. In places where you go wrong, you will get corrected and be shown the direction. These loan officers are located in different states throughout the country. So, depending on your location, and the lender you choose, you can find the nearest service center in your state and have a loan officer.
Decide the type of loan you want
As already mentioned, there are various types of farmer loans. Before you apply for the loan, you need to decide what type of loan you need. The basic loan types available are:
Farm ownership loans that help you buy farmland.
Microloans which help farmers and ranchers have an important source of income during the startup years.
Operating loans which help you buy farm supplies and equipment, assist in diversify operations and,
Emergency Loans help you recover from storms and natural disasters.
Therefore, depending on your business needs, you can choose an option that best serves you. Again, a loan officer comes in handy to help you in this step.
Develop a Business Plan
It would help if you had a clear, detailed business plan to qualify for any loan. A business plan should include your mission, vision, and goals for your farm business, your current assets, what your business products and what makes your products unique, valuable, or different from other farmers’ products, where/how you will advertise, and sell your products and develop your farm business, how you will earn enough money to finance your business and support your personal life. You have proof that you have it all together.
Some of the reasons you need a business plan are:
It’s a requirement to get a loan. Using the plan, lenders can judge whether your business can work.
A business plan will keep you organized. It will ensure you take all the necessary steps and remember all the details.
The business plan will act as your guide. You can use it to measure your progress.
A business plan will help you know why you are farming.
Gather Documents and Receive Decision
The final step is to gather all the important papers and fill out the required forms. Depending on the type of loan you are applying for and the institution, you will be required to fill out different forms. It’s important to have a checklist for the required documents because this can be a very tedious step. If you miss a document or two, you will be sent back; this can be very frustrating. However, if you are still working with a loan officer, this can be an easy step to get by. Lastly, dress professionally and arrive on time when going to the loan closing meeting. Be prepared and ask questions. Whatever response you get, your loan officer will help you through it.
Getting through financial challenges is one hurdle that farmers have to overcome, but it’s the most important. When you get through it, the rest will be manageable. Following the explained steps will make the process easier and more manageable. Just be keen to work with a lender who is well seasoned in the industry and knows what you are planning. Although borrowing is not always easy, it’s almost necessary. However, when you get the financing make sure you spend the money as intended. Any slight deviation from the plan can mean trouble on your end. But, remember the process will not happen overnight. The secret is to start early, start even six months earlier. In agriculture, without planning your business is bound to fail. So, planning is everything.
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