Types of Loans for Agriculture
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Agriculture Line of Credit / Agriculture Overdraft Facility
Farming is a highly seasonal and cyclical business
and farms are especially vulnerable to unexpected and disruptive events including droughts and floods. Prices of inputs such as seeds and fertilizer fluctuate as do the prices of the commodities sold.
Maintaining an agriculture line of credit or overdraft facility can be extremely helpful to ensure that you are able to preserve adequate working capital through any unexpected downturns or through periods of reduced cash flows.
After all, inadequate working capital and/or cash flows is the primary reason for default and bankruptcy for farmers.
One of the many advantages of a lines of credit is its flexibility in that you can draw down on money immediately without even speaking to a banker. Many lenders also offer lines of credit specifically tailored to farms and agricultural businesses and provide flexible payment schedules that you can align with your business’s income schedule.
Lenders will accept collateral in the form of residential property or farm land and many banks will also allow you to use a term deposit as collateral. Other possible forms of collateral for an agriculture line of credit include livestock, farm equipment and machinery or other farm assets.
An overdraft facility is simply a line of credit directly linked to an existing business bank account. The credit becomes available once all the funds in the account have been used. It is important to understand what fees and interest costs are associated with using an overdraft facility.
Learn more about business line of credit.
One of the many advantages of a lines of credit is its flexibility in that you can draw down on money immediately without even speaking to a banker. Many lenders also offer lines of credit specifically tailored to farms and agricultural businesses and provide flexible payment schedules that you can align with your business’s income schedule.
Lenders will accept collateral in the form of residential property or farm land and many banks will also allow you to use a term deposit as collateral. Other possible forms of collateral for an agriculture line of credit include livestock, farm equipment and machinery or other farm assets.
An overdraft facility is simply a line of credit directly linked to an existing business bank account. The credit becomes available once all the funds in the account have been used. It is important to understand what fees and interest costs are associated with using an overdraft facility.
Learn more about business line of credit.
2
Agriculture Term Loan
If you are looking for
long term capital to invest in growing or improving your farm
through land purchases or major improvement works, building production facilities etc., a term loan may be an excellent option.
Agriculture term loans are available with terms from 5 to 20 years and allow you to borrow anything from $15k to $2 million or more. Most lenders will allow you to structure repayments in a way that is most suitable for your farm’s cash flow.
Common types of collateral accepted for agriculture term loans include residential property or land. Some lenders will also accept water, livestock or crops as collateral for agricultural loans.
Read more about secured business loans.
Agriculture term loans are available with terms from 5 to 20 years and allow you to borrow anything from $15k to $2 million or more. Most lenders will allow you to structure repayments in a way that is most suitable for your farm’s cash flow.
Common types of collateral accepted for agriculture term loans include residential property or land. Some lenders will also accept water, livestock or crops as collateral for agricultural loans.
Read more about secured business loans.
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Livestock Finance
Livestock finance provides funding to
purchase livestock, re-establish stock numbers, invest in breeding or cover veterinary expenses.
Livestock loans start at around
$30,000
and have a term of 1 to 3 years. Interest rates can often be capitalized allowing you to repay the loan and interest when you sell or refinance the livestock. Collateral for livestock loans is equity in the
Speak to one of our brokers to learn more about livestock finance.
Speak to one of our brokers to learn more about livestock finance.
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Low Doc Loans for Farms
Low Doc loans are available primarily to hobby farms
but some lenders will also extend this type of loan to commercial farms. Low doc loans involve much lower requirements in terms of proof of income and assets compared to regular loans. However due to the inherently higher risk that low doc loans pose to lenders, collateral is typically required in the form of a 1st mortgage and interest rates are high.
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Farm Equipment Finance
One of the most common need for agricultural businesses is equipment finance. See an in-depth discussion on the different forms of farm equipment finance below.