Agriculture Business Loans Explained
We’ve explained, in summary, the best loan types for starting an agriculture business above, now we will take a deeper look into each loan type.
Agricultural loans include land acquisition, orchard development, storage and packing facilities, real estate improvement, and so much more. These loans also make provisions for an operating budget to get you through the first few years.
This industry-specific loan is beneficial because you can choose the terms and type of loan you want based on your needs. For instance, the options include short, medium, and long-term, while you can also opt for operating and real estate fundings if that’s all you need. It’s extremely versatile for anyone either setting up a new agriculture business or expanding an existing one.
While Fundera specializes in startup loans, it also covers several aspects of agriculture business loans. You can incorporate credit cards for continuous funds when needed and invoice factoring to cater to your administration requirements.
If you would like to obtain funds primarily for vehicles and tools, you may want to take a detailed look at equipment financing. Purchasing tools and vehicles require a significant capital outlay. Furthermore, the lender may require a down payment before you acquire any loan. This doesn’t only apply to movable assets, such as tractors and mowers, but also to fixed assets like silos and barns.
Aside from real estate, vehicles and equipment will form the bulk of your initial capital layout. You won’t be able to work your crops without equipment. An equipment loan can set you on the path toward starting your agriculture business with the right tools. It can also provide you with finances if you need to replace parts in the first year or so.
SmartBiz is known for financing construction loans, which include setup costs for equipment and machinery. You can use its online platform to determine your business’s best loan options, by assessing various terms and amounts. It also has long-term periods, letting you plan for the next few years.
The above loans are excellent for starting your agriculture company, but what happens if your planning goes wrong, and there’s suddenly a mechanical failure that you can’t afford to repair? A business line of credit is a mix between a loan and a credit card, providing you with funds. What’s great is that you’ll only pay interest on the amount of money that you use. Once you make a payment on the credit, the money becomes available again.
Also known as revolving credit, these loan types are ideal for helping you with emergencies, such as burst irrigation pipes or broken fences. If you suddenly need to procure additional tools or resources in adverse conditions, you can draw from your line of credit and repay it at your convenience.
BlueVine has an exceptional line of credit for up to $250,000 with a low-interest rate of 4.8%. Since they understand the need for urgency, you won’t wait long until the approved funds are in your account. You can also apply for a loan through an online platform.
The government has unique agriculture grants for farmers to help them start their businesses. Known as Small Business Administration loans, these loan providers can pay up to 85% of the financing to cover your initial costs. However, assets can be sold if you fail to make a turnover, and you need to have been in business for a few years to qualify.
This may be viewed as a grant rather than a startup loan. Since the government only guarantees a percentage, you may need to find financing for the remainder of the money you require. This loan type helps new agricultural businesses who are struggling to get funds through other means.
LendingClub specializes in agricultural loans but also offers SBA funding. It works as a community, functioning on peer-to-peer support and finding the best financing options available. It has a fast quote system to help you get established quickly.