Hence, farmers are different from other business people in that. Here is what you need to know when you want to access Farm Credit.
Getting Credit for the Farmer
If you are a business person and you are a sole trader, then you are among the many people in America who depend on their own earnings and not an employer.
This is not something new to those in agriculture most of the farmers are the ones who own and operate their farms.
The farmer is the head of the company, the secretary, the treasurer, and the janitor all at once.
Freelance income may vary from year to year or even from one month to another depending on the number of projects that one is paid to do.
This is especially the case with the American farmers who have to deal with a number of factors of production such as inputs, weather and crop prices.
Of course, farmers will have to take loans, either for their business or for themselves.
Whether one is borrowing operating money for the season, financing equipment or even buying a home, it is essential to know how the process occurs.
Understanding how your lender perceives a loan application for the self-employed and the required information can help you get your loan approved faster and with less hassle.
What Lenders Look At
For the borrowers who have a steady income and are employees, W-2s, paystubs, and possibly tax returns will be required by the lenders.
The lender would like to be sure that the regular income is stable, predictable and sufficient to cover the loan requested, and other obligations, with some buffer.
For farmers, however, income is anything but regular. Depending on the crop or the commodity grown, farmers are paid once or twice in a year.
Adding to this is the fact that crop cycles always divide a tax fiscal year.
Some of the lenders who rely on the income to establish the ability of a borrower to repay the loan may find it hard to understand these cash flow cycles and tax year differences.
The ability to define to your lender how and when the income is received will assist in explaining to the lender the nature of the business and how the loan will be repaid.
Farm loans are one of the most important types of loans for Agricultural business since they are necessary for financing the activity of both experienced and beginner farmers.
Also referred to as agriculture loans, and farm operating loans, these are specific credit products designed to cater for the agricultural industry.
They act as life-line providers in that they arrange for the acquisition of land and equipment as well as the running of the business on a daily basis.
Farmers may require a loan for different reasons such as increasing the size of their farms, purchasing new inputs and equipment, financing the expenses of harvesting or other unpredictable occurrences such as calamities.
Since farming is a cyclic and unpredictable business, most of the farms’ operations depend on credit facilities from agricultural loans.
Advantages and Disadvantages of Various Agriculture Loans
Like in any other type of agricultural loan, each type has its own advantages and disadvantages.
What one should understand is that the details of each loan type can be refined by the type of farming that you engage in, be it crops or livestock and your objectives.
If you have any questions concerning certain loans, feel free to call any of our agents to discuss the details of your needs and the particular loan.
It is for this reason that for now, we will make it easy for first-time borrowers to understand the basics of these loans.
Loan Eligibility Criteria
Knowledge of the requirements for eligibility is vital in the acquisition of funding for new farmers and ranchers.
It can lead to financial stability since it proves the creditworthiness of the business and the existence of a well-developed plan.
Cooperating with a reliable lender like Capital Farm Credit who clearly describes the conditions when you can qualify for a loan to minimize risks and avoid being offered a loan with unfair terms.