Farming can be a costly business. From buying new land and equipment to building and maintaining facilities, it involves many repairs and replacements (usually unexpected) that can quickly strain a farmer’s budget. Many farmers rely on ag financing to cover ongoing costs and weather financial surprises.
Also known as farm land loans, agricultural loans are designed specifically for farmers seeking extra funding to support their businesses. Unlike conventional loans, land loan tends to have lower interest rates. It can also be used for various needs, such as purchasing farmland, funding marketing costs, and covering operating expenses. You can expand your operations or buy a new farm with an agricultural loan.
This type of loan is available from traditional lenders, government agencies, and dedicated private-sector ag lenders. Certain factors — such as your credit score and farming experience — will determine your loan’s approval. This is why it’s essential to take the time to understand the things that can impact your eligibility for an agriculture business loan.
Tips on qualifying for an agricultural loan
- Build a good credit score and contact a lender.
Requirements vary per lender, but one of the things they often check is your credit score. Here at Private Capital Investors, we require borrowers to have a minimum score of 680 from at least one of the major credit reporting bureaus. In addition, a lender may request a business plan to determine how you will use the loan.
Bad credit will make qualifying for financing harder, but it’s not always a deal breaker. Here’s what you can do to get a farm loan despite having a low credit score:
- Find a low-credit agricultural lender.
Some lenders are willing to work with borrowers with lower credit scores, though this comes at a cost because the APR will be higher. The good news is that if you can improve your credit score in the future, you can always refinance your agriculture business loan at a lower rate.
- Prove your farming experience.
Some government programs, such as FSA, will look for significant farming experience and consider giving you a loan if you have an acceptable repayment history with other creditors, even if you have a less-than-desirable credit score.
- Ask someone to co-sign the loan.
Make sure to choose a trustworthy co-signer with a better credit score.
- Try income-based loans.
Some lenders look at your farm’s income and let you borrow money if it’s above a specific limit. These loans may be smaller, but they’re approved more quickly.
- Prove that there’s more to your bad credit.
Prepare a strong business plan that demonstrates your financial acumen. Highlight high-value assets you own and maintain a healthy debt ratio to strengthen your application so that the lender doesn’t rely solely on your credit score.
- Choose the correct type of agricultural loan.
The specific requirements for ag financing depend on the type of loan you’re seeking. Ag lenders have dedicated professionals to review applications to determine if an applicant is qualified. For example, if you need an agriculture land loan, they will need proof of ownership or intent to purchase the specific property. Some lenders might require a minimum of years of experience operating a farm or ranch.
- Explore the various types of agricultural loans.
Agricultural loans come in many different types to meet specific financial needs. For instance, an agriculture business loan could be used for a down payment to secure a new farm, while some loans are designed for farmers who currently own a farm and require emergency funding.
Below are the types of available ag financing:
- Operational loans – These loans cover your farm’s operational costs, including purchasing equipment, livestock, and seeds. New farmers can also use these for startup costs.
- Farm ownership loans – This financing option can help you buy a new form or expand an existing one. It’s also offered as direct farm ownership down payment loans.
- Microloans – These are smaller types of financing that can provide a small but much-needed influx of capital to agricultural entrepreneurs who need money for essentials, such as fertilizer or basic equipment.
- Emergency loans – Did a natural disaster impact your business? You can apply for an emergency loan to recoup your losses. However, you must fulfill certain conditions to qualify for this agricultural loan (such as at least a 30% reduction in primary crops).
- Term loans – These are provided as one-time payments that must be repaid over an agreed term.
- Business lines of credit – This revolving credit facility lets you get physical cash when necessary, making it ideal for ongoing capital needs, such as material orders, payroll, or projects with undetermined costs. You only pay interest on the amount you withdraw — not the entire credit limit.
And once you repay what you’ve borrowed, those funds become available again for future needs.
- Equipment financing—This agriculture business loan amortizes an asset’s cost over an extended schedule, with the equipment itself serving as collateral. Sometimes, it can be used to reduce tax liability.
- SBA loans – These loans have low interest rates, high borrowing limits, and manageable repayment terms. The government partially guarantees 75% to 85% of your borrowed amount, meaning they will pay the balance to the lender if you default.
Are you looking for agricultural loans?
We offer dependable ag financing at Private Capital Investors to help you maintain, grow, or kickstart your agricultural endeavors.
We understand that every farmer has different needs, so we customize every agricultural loan we issue to meet specific requirements. We have years of experience helping farmers and landowners acquire the necessary funding to purchase cultivable land for their business or to build essential infrastructure, such as barns and irrigation equipment. Our loans are also flexible and ideal for purchasing necessary farm equipment.
We pride ourselves on being ag lenders who understand the challenges and unpredictability of a farming business. This is why we offer various loan options and tailor each financing plan to your unique situation.
Our seasoned loan officers are ready to work with you to provide the right agriculture business loan that fits your needs. We can help you get agricultural financing in various states and cities, including Miami, Texas, Phoenix, Massachusetts, Denver, and Florida.
Expect quick approvals, rates as low as 7%, and funding availability in as little as 14 days. Call 972-865-6206 to get started.
