In the farming industry, it is common for farmers to apply for loans to help with the cost of operations. These are known as ag business loans or ag operating loans, and they are used to finance day-to-day expenses, to purchase land, crops, and machinery, for the acquisition and maintenance of equipment and structures, and more. If you are a farmer looking to buy land to farm or supplies to use but are short on funds, applying for an ag operating loan is a possible solution. Below are the things that you have to do when applying for ag operating or ag business loans.
Look for a lender
There are many places where you can apply for an ag operating loan. In the United States, the federal government has an agency that handles the issuance of loans to farmers. Called the Farm Service Agency or FSA, it is a part of the Department of Agriculture and serves to provide efficient and effective agricultural programs for American farmers throughout the country. There are also many private institutions that offer different types of farming loans to help farmers buy their own land and machinery, acquire crops and supplies, or fund their daily operating expenses. The right lender for you is one that has a good reputation and can provide the financial assistance you need to achieve your goals.To help you make a decision, look for answers to questions like “How knowledgeable are they on current events, market trends, and other issues that farmers are dealing with right now?” “What are theirreviews like from other farmers?” “How committed are they to being with you long-term?” or “Are they reliable when things get tough?” Compare your answers across different lenders to see which one best suits your needs.
Prepare the required documents
Just like applying for a car loan or a housing loan, getting an ag loan involves submitting various documents. Usually, lenders require applicants to provide income statements, tax returns, an overview of the previous year’s operations, bank statements, other existing loans, year-end balance sheets, a list of inventory for products, and plans for the upcoming year. Make sureto gather all of the documents required beforehand so that your application process can proceed smoothly.
Create and present a plan
Meeting with your chosen lender is an important part of the application process. At this meeting you shouldbe ready for an in-depth discussion of your business and your need for a loan. Include details about your work as a farmer, the challenges you have faced throughout your career, and the circumstances that led you to apply for a loan. Also talk about your short-term and long-term goals, your action plan to achieve these goals and your accomplishments so far. Prepare to answer several questions about your farming background and experience, too. The more information you can give, the better the lender can understand your situation. From here, the lender will present the loan terms and draw up a contract for you to sign. Make sure to read this document carefully and ask questions about anything that doesn’t seem clear.
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