Choosing the right financing option for your farm can be a daunting task. There are many factors to consider, from how you want to structure your business to what kind of risk protection you would like. This blog will introduce some basic funding options that may suit your agricultural needs.
Secured and Unsecured Loans
A loan allows you to borrow money directly from a lending institution at a fixed interest rate over the loan term. Some loans can be secured by the assets of your business, such as equipment and property, making them risk-free for lenders. Unsecured loans are also available in different forms, including personal loans and credit cards. You’ll want to make sure that you establish repayment plans and understand the terms before making a decision.
A cash advance is a short-term loan that you can get to pay for an immediate need. This form of financing can be very helpful when unforeseen emergencies (such as natural disasters) hurt your farming abilities. When you find a good lender, you can sell some of your future earnings for immediate funding. This means you won’t have to wait until your farm makes more money later. You also don’t need perfect credit to get a cash advance. It’s just important that you have a good idea of how much revenue you should have down the line.
Equipment financing is another option you can take if you need new tools or upgrades. Technological advancements have permeated all aspects of modern living, including the agricultural sphere, so it’s good to keep up with your competitors. While paying upfront for tractors, harvesters, and other expensive devices can be a hassle, monthly installments can help you forecast and budget preemptively.
Lines of Credit
Lines of credit give you the ability to borrow money on an as-needed basis and oftentimes come with low-interest rates. This may be a better option if you don’t need a large amount of money but still want the security of being able to borrow. A revolving line of credit allows you to borrow up to your limit and pay back the balance each month, so you shouldn’t worry about not having enough money when it’s time to buy equipment.
Farming comes with a lot of labor and focus, which can be thrown off when money is tight. Looking at financing options can help you alleviate this problem and improve your farm overall.