Editor's choice: OnDeck business lines of credit
- Business or practice ownership not required
- No hard annual revenue or time-in-business criteria
- Multiple loans OK
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If you’re in agriculture, you probably thought you’d spend most of your time farming, not trying to find ways to fund your project. For new farmers with no background in finance, it’s important not to let the never-ending list of expenses discourage you. You have private and public options to help you finance your farm and keep you doing what you love.
New farmers face a challenge: lenders aren’t crazy about providing large loans to businesses that haven’t been around very long. But it doesn’t mean you’re out of luck. There are a few lending options available for those just starting out.
The American Rescue Plan Act has a few programs that affect farm loans:
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Because agribusiness refers to any business that earns most or all of its revenue from agriculture, many of your farm financing options will be available for an agribusiness operation.
You can finance just about anything you need, from purchasing new breeding stock to buying farm machinery to expanding your farm’s staff. That’s because agribusiness is a huge umbrella term that encompasses every step of agricultural production. Banks, credit unions and other lenders — including the USDA — all offer loans to help with your agribusiness.
Like any farm or business loan, you’ll need to supply your agribusiness’s financial statements and build a strong application. Target lenders that work specifically in your niche. You should also know exactly what you plan on using your loan for will as this will help you find approval.
Different lenders use these terms to refer to slightly different eligibility, so you’ll want to confirm them with specific lenders.
However, you’ll find many lenders that agree on these rough definitions:
The number of farmers filing for Chapter 12 bankruptcy has been on the rise, according to a 2019 report by the Federal Reserve Bank of Minneapolis. A combination of higher interest rates and a drop in agriculture prices have made it more difficult for farmers to pay back their loans.
It’s might make it more difficult for farmers to qualify for loans, as lenders could start to view the industry as more of a risk. Dairy farmers were hit the hardest and might have even more difficulty qualifying than other types of farmers. If your farm is struggling, you might want to look into government-funded options and other forms of financing besides traditional loans.
The US Department of Agriculture is one of the first places a new farmer should turn to for financing. In recent years, the government has increased its funding and other resources specifically for beginner farmers.
The FSA is a sector within the US Department of Agriculture that specializes in resources for farmers and ranchers. Here are three targeted financing options they offer:
If you have a farm business in the US, you can likely apply for a loan with the FSA.
However, you won’t be able to apply for an FSA loan if:
Choosing the right type of financing is a first steps to getting funding for your new farming venture. When comparing your options, weigh the importance of these elements against your needs:
How much information and documentation you’ll need to submit will differ by lender. For instance, short-term lenders typically require less documentation than paperwork-heavy Small Business Administration loans.
In general, you’ll need to provide at least:
You have options beyond borrowing from a lender. A few include:
Here are the top 10 places for farming based on number of farms recorded by the Census Bureau in that state:
How you repay your farm loan depends on the type of financing as well as the terms of your loan. Typically you’ll have to make fixed monthly repayments on interest and fees until you’ve paid it back in full.
If you’re struggling with repayments, contact your creditors as soon as possible. They might be willing to rework your repayment plan, given the circumstances. Or, consider refinancing your loan with a different lender for more favorable rates and terms.
Running a new farm takes passion, dedication and hard work — not to mention time in finding the right funding to help you support its early days. As a farmer who’s just starting out, you have a range of options designed to get you funding. By knowing exactly what you need, you can compare and narrow your choices to one that fits your budget.
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A business line of credit is a useful tool. But as a startup, you may not qualify for the best interest rates with most lenders. Explore your options — and alternatives — for flexible funding as a new business.
The newest stimulus legislation provides for restaurant grants, debt relief for farmers, PPP loan updates and more. Here’s an overview of what’s included.
The White House announced new changes to PPP loans, helping the smallest businesses and opening access to people with student loan defaults or nonfraudulent felony convictions.
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The PPP wasn’t made with sole proprietors and independent contractors in mind. Here are other options that can help.
Shopify merchants may be able to get funding without a credit check.
You only have until May 31, 2021 to get your next application in.
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