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    Find the Best Rates on Agriculture Loans in 2020

    Having a successful agricultural sector is vital to the economy and, to achieve this, farms and ranches need to have capital to pay for everything, from agricultural machinery to buying new land. 

    Banks and other financial institutions are committed to helping the farming community to access much-needed cash and loans, and run a great many farm loan programs which cover many different kinds of loans. There are also USDA farm loans that are backed by the Department of Agriculture’s FSA and paid out of the central budget.

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    What is an agriculture loan?

    As anyone who runs a farm knows, it is an expensive business with many overheads. These include having to pay for farm equipment, covering operating costs and even buying new pockets of land. Often a great deal of cash is already tied up in the business, so it becomes necessary to borrow money, and agricultural loans are a generally low-interest way to raise the needed funds. There are many different kinds of agricultural loans which we helpfully explain in further detail below.

    Real estate purchases and improvement

    Sometimes the opportunity arises for a farm to expand or to enhance its existing land, and there may be a need for loan which can be obtained and paid back over a chosen period of time.

    Vineyard and orchard development

    Valuable crops like grapes and orchard fruit need more care and investment than other types of agriculture, especially during the years when they are being first developed.

    Packing and storage facilities

    Many farms today are taking control of their own packing services to minimize overheads, and there is always the need for storage facilities. As these demands grow, so does the need to pay for them.

    Timber/Land purchases

    Investing in timber forests may be outside the scope of many farms and ranches but, in some areas of the country, there are opportunities to invest over the long term and profit from timber sales.

    Livestock purchases and feed

    A major overhead for farms, especially when they are starting out, is the purchase of livestock and their feed. So these are often used as first time farmer loans to cover costs as the business becomes established.

    Production and processing equipment purchases

    Where production and processing are included in the business, farm equipment financing is needed to invest in the potentially complex requirements for these processes to be carried out.

    Building repairs and improvements

    Farm buildings are often exposed to harsh conditions and heavy use all year round, so it is little surprise that repairs, and the agriculture loans to pay for them, are often needed.

    Construction development

    There are times when additional construction needs to be carried out and loans may be needed not just to pay for the building work, but also for the planning and preparation leading up to it.

    Water development and irrigation projects

    The importance of good irrigation and drainage can’t be overstated, so one of the most significant investments any farm can make is in ensuring that crops remain well-watered all year round. Large projects like this, however, often require a large budget.

    Operating expenses

    Operating expenses are always high, especially when starting out. So many first time farmer loans are wholly or partly intended to cover operating costs until profitability is achieved.

    Debt refinancing

    Often, farmers seek loans to refinance debt which has built up over a period of time. These can also include farm loans with bad credit, which are also available from many lenders.

    What are farm loans?

    Farm loans are very similar to agriculture loans and the terms are quite interchangeable. One difference is that some kinds of farm loans are aimed at particular groups of people - for example, farm loans for veterans and young farmer loans. They can also be known as ranch loans and tend to offer comparatively low interest rates with flexible terms for payment.

    Farm Operating Loans

    These are a very valuable way to start, maintain, and improve a farm or ranch and its operation. They are particularly useful as a beginning farmer loan when operating costs will almost certainly be greater than the farm's income.

    Microloan Programs

    These are generally aimed at smaller, more niche, operations, including those that achieve most of their sales directly, for example, via farmers’ markets, and therefore need lower levels of financing.

    Farm Ownership Loans

    As the name suggests, these are loans used to acquire farmland and can sometimes also be known as an FSA beginning farmer loan. There are, generally, no previous form of ownership requirements, and up to 100% financing is available.

    Guaranteed Farm Loans

    These are loans from USDA-approved lenders that can be guaranteed by the FSA for up to 95% of their value, thus providing a valuable safety net for the borrower.

    Minority and Women Farmers and Ranchers

    The FSA is committed to offering opportunities to all sectors of society, so funds are exclusively put aside for farm and ranch loans available to women, African-Americans, Alaskan Natives, Native Americans, Native Hawaiians, and Pacific Islanders, and people of Hispanic or Asian origin.

    Beginning Farmers and Ranchers' Loans

    There’s a real commitment to bringing on the next generation of farmers, so the FSA also has money intended to be paid out in the form of young and beginning farmer loans.

    Emergency Farm Loans

    These loans are triggered by a natural disaster, as designated by the Secretary of Agriculture or the President, and aim to pay to make good any damage or losses that are caused by it.

    Native American Tribal Loans

    The aim of these is to help tribes obtain additional property within the reservation to increase agricultural productivity and also to work alongside Indian reservation payday loans.

    Is there a difference between agriculture and farm loans?

    There’s no largely specific and agreed difference between agriculture and farm loans, although agriculture loans do tend to be utilized more for a specific purpose, e.g. used in payment to an agricultural equipment manufacturer. On the other hand, a farmer’s home administration loan may have a more general use, and could also be classed as a farm loan.  

    How agriculture loans work

    These work like any other loan. An agreed amount is lent which is then repaid in regular installments over the agreed term.

    How to apply for an agriculture loan

    The first step is to prepare a case for why a loan is needed, outlining the benefits it is expected to bring. Often, it’s best to approach the farm’s main bank as they will know a little bit more about the business concerned. The FSA also offers all kinds of help from farm equipment financing to emergency loans.

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    Types of agriculture loan

    There are various different kinds of agricultural loans, and the one that’ most suitable for you and your business depends on a number of factors. These range from the term it’s to be paid back over to its main purpose.

    Long-term Farm Loans

    Long term farm loans are those which are paid back over ten years or more. Therefore, these tend to be for larger amounts and are typically used to pay for construction projects or used as heavy equipment loans.

    Intermediate-term Agricultural Loans

    These are generally paid back between four and ten years with many being used as farm equipment loans. When they are paid off, it may well be time to invest in new, or replacement, equipment.

    Short-term Agricultural Loans

    Short-term loans are suitable for short term needs and do not normally exceed four years. They are also more likely to be part of a microloans program.

    Agriculture Real Estate Loans

    Real estate loans are generally for higher amounts and have a longer repayment period, in much the same way as a mortgage.

    Agriculture Term Loans

    This is a general description of agriculture loans that have a fixed term over which they have to be repaid, unlike a revolving line of credit which has no fixed term.

    Agriculture Operating Loans

    These are designed to cover the operational costs of starting or maintaining a farm and helping it to prosper.

    Agriculture Loan with Bad Credit

    Conditions have been challenging for farmers in recent times, and many have bad credit histories as a result. But banks and the FSA understand this and make loans available. The interest rates may be a little higher, but many believe this is a worthwhile price to pay to keep their livelihoods going.

    Conclusion

    For farmers and ranchers looking for access to additional finance, there are plenty of options available. Many of the loans are tailor-made for specific purposes, while others are more general. There are also many different payment terms so meeting budgetary needs is also possible. A great deal of help is also provided by the FSA, an arm of the USDA, and their guaranteed loans provide an additional safety net for farmers. So, it is simply a question of identifying the right kind of farm loan and going through the usually straightforward application process.

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