Agriculture Loans for Growing Your Farm Business

Farmers are the bedrock of the global economy. According to the USDA, one farmer produces enough food to feed 155 people, and small farmers lead the way. Family farmers produce over 80% of the world’s food supply. Although farms are important for society to function, they can get expensive. You have to buy land, seeds, equipment, and other resources. These investments can take a toll on your bank account, and not every farmer has enough money to cover costs. An agriculture loan can cover the difference and provide you with the necessary resources.

What is an Agriculture Loan?

An agriculture loan is a financial product specifically for farmers. Farm owners can take out these loans and use them to maintain or expand operations. You can use them to cover any expense and have to make monthly payments towards the principal. Selecting a loan with a longer term will reduce your monthly payments but increase interest payments in the long run.

How to Use Agriculture Loans to Grow Your Farm Business

An agriculture loan provides you with extra capital for your farm business. Farm owners can deploy money into several projects to increase cash flow, improve productivity, and create long-term opportunities. Here are some ideas for how to use this loan to grow your business.

Buy/Upgrade Farm Equipment

Farm equipment increases your efficiency. As a result, you can take care of more crops and yield greater harvests. Buying new equipment can expand your capabilities and maximize every square foot of your farmland. However, some equipment becomes less reliable as it ages. Repairs preserve equipment, but you may need an upgrade or replacement in the future. Either scenario can represent a significant investment, and the money from an agriculture loan can help.

Stock Up on Farm Supplies

Farmers use many supplies to cultivate the soil, plant crops, and take care of livestock. An agriculture loan acts as an extra funding source to cover the costs of supplies. This investment helps you maintain your current farmland so you can address growth opportunities.

Purchase/Lease Land

Some farm owners don’t want to stop with a single farm. They want to buy new land and put food on more tables. Purchasing and leasing land allows farmers to yield greater harvests and invest in more livestock. However, purchasing and leasing land both require significant investments. You have to acquire the land and then buy the equipment needed to manage that land. Raising capital with an agriculture loan can speed up land acquisition and increase your cash flow sooner.

Making Improvements and Repairs

Farming equipment simplifies the business model, but this equipment can get damaged as you use it more often. Therefore, you may need quick repairs and improvements to continue operations. Agriculture loans can provide an emergency funding source if you need quick repairs or modifications.

Cover Operating Costs

Every farm relies on operating costs to produce great harvests. These operating costs eat into a farmer’s profits before crops get harvested. The crops and livestock can generate a profitable return on your investment, but you have to fund the initial operating costs before selling produce. Borrowing money from a small business lender can cover your operating costs as your crops and livestock grow.

Marketing and Advertising

Every business uses a combination of marketing and advertising to get in front of more customers. These investments can position your farm as one of the most reliable producers in your state or country. Spending more money on marketing and ads lets you try more channels and run more A/B split tests. You will get access to more marketing data and insights, which can help you make more educated decisions. A loan can accelerate your marketing and subsequently grow your business.

Weathering Out the Storm

Farmers endure boom and bust cycles. Farmers can comfortably cover expenses during profitable economic cycles with their cash flow. However, bust cycles can put financial stress on the business model. Borrowing extra cash can help you weather out the storm and keep your farm afloat. Some farmers accumulate cash during dry seasons to capitalize on investment opportunities. Other farmers may want to get out of the business during bust cycles and offer an attractive price for their property.

Recover After Natural Disasters

Natural disasters can hurt any business, but farms are more vulnerable than most companies. A natural disaster can spoil crops and kill livestock. Farmers can’t immediately replace these losses. Instead, they have to raise new crops and livestock and continue paying operating costs. A loan can provide you with enough capital to navigate your farm on the path to recovery.

Where to Get Agriculture Loans

Farm loans can fortify your business and provide vital resources. Whether you need money to stay afloat or expand your farm business, extra capital can help. You can consult the following solutions to get additional funds for your farm.

Farm Ownership Loan

If you want to buy or grow your farm, this loan will help. The FSA offers these loans to farm owners who need help with construction, closing costs, soil preservation, and other initiatives that improve farmland.

Farm Operating Loan

Farmers endure long workdays and hope to build a vibrant business. However, you’ll have to pay operating costs without any cash flow from your efforts when you’re getting started. A farm operating loan can help you get started with your farm. You can use these proceeds to buy crops, livestock, and other necessary investments for your farm. You can repay the loan with cash flow once your farm starts generating revenue.

Microloan

A microloan is for farmers who don’t need extensive loans but would still like some financing. Less established farmers use these loans to buy equipment and handle some operating expenses. You can borrow up to $50,000 for a microloan.