If you own a small farm and are looking to obtain a loan to help with your operations, there are many factors you should consider before you get started and head to your bank. The type of financing you need, for example, will greatly depend on things such as the size of your farm, whether you employ a staff, and what you plan to use the loan for, among others. Read these considerations to be sure you’re prepared to secure a loan for your farm.
The first thing any bank will want to see is the proper documentation to go along with your loan paperwork. Your bank will need to see your whole picture to help understand your lending needs and see how they can best meet them. Before you make an appointment with your banker about getting a farm loan, secure the necessary documentation so you’re prepared for your meeting. Some documentation include copies of any revenue you receive—whether it’s through tax forms, land rental agreements, or other income— a well-written and thoroughly-completed spends sheet, and a business plan detailing how the loan will help boost your revenue and bring you a solid return so you can pay your loan off. The more prepared you can be for your initial meeting with the bank, the better off you’ll be.
Know Your Needs
You should also know exactly what your needs are before you meet other your bank. When they ask how much you’re looking for, you should have a general idea or outline of exactly how much money you’re looking for and what the money will be used for. A bank cannot in good faith lend a large sum of money to someone who doesn’t do the research to know how much they actually need to fund their request or what they’ll use it for. You may not know how you’ll use every penny, but if you can give them a pretty detailed explanation that should satisfy your lender. If, for example, you’d like to improve operational efficiencies with your farm but to do that you’ll need two new tractors that will work faster than what you’re currently using, be sure you explain that in your agriculture loan request, along with how much you’ll save in time and man power by being able to use the loan on new equipment.
You should be prepared to be patient during the loan process. It’s not realistic to think that you’ll walk into your bank and go home with a loan the same day. Chances are your lender will want to meet with you again and even visit your farm to look at your business first hand and get a better picture of your operations.
Farm lending is an intricate process that often involves a lot of back and forth, meetings, and paperwork. However, if you’re patient and willing to work with the bank, your diligence should pay off.