The average business loan stands at about $663,000. Perhaps the thought of borrowing that kind of money for your farming business scares you. But it shouldn’t. If you have a good reason for getting an AG loan from your Indiana community bank, you are likely to get it. And so long as you have a good business plan for spending that money, you should not be scared of the vast numbers.
Here are some of the situations that call for an AG loan:
1. You need more land
If you have excellent plans for your farming operation but don’t have enough land, then you need to get it somehow. You might also just be starting and don’t have any land to speak of. In that case, you need land from which to launch your farming operation.
You can either lease that land or buy it. While buying more land is an expensive endeavor, it might make the most sense to you. The property will be yours, and you can pass it on to the next generation. So getting an agricultural loan to buy land, which usually appreciates, is not such a bad thing.
2. You need equipment to run your farm
You cannot run a farm efficiently without mechanization. Farm equipment and vehicles help you farm, irrigate, and harvest faster. It cuts down on the time and human labor required to achieve similar results. However, farm equipment is not free. And even if you choose to buy your equipment secondhand, you will be surprised by the price tag attached to some of the stuff you want.
You can borrow equipment for a while if you are just starting. You might also be able to rent these things. But if you intend to farm for a long time, you will need to start buying your equipment sooner or later. It’s the only way for you to farm at your convenience, without having to wait in line to use some machines. Doing so might cost you because the seasons affect the harvest. And if you are late to plant, you will be late for everything else.
3. You don’t have enough cash to maintain your farming operations
Studies show that over 80% of businesses fail due to poor cash flow. While the lack of cash flow is usually attributed to mismanagement, sometimes it’s not. The reality is that farming is quite unpredictable. There is only so much you can do to safeguard yourself against Mother Nature.
You might deal with fires or storms. Your crops will fail as a result, which means you will have lower revenues and poor cash flow. Your plants and animals might be affected by diseases that you did not anticipate. Additionally, your major customers could also fail to pay on time. Then there is the fact that farm products are subject to global market demands and can be affected by political wars. Labor shortages can also be a problem.
So getting an ag loan to cushion you from some of the financial issues that come up can be the best way to ensure smooth cash flow. That will then give you the time that you need to get back on your feet again.
4. You have too many loans
If you have several loans or even one loan that has become unmanageable, you should consider getting a new loan. It seems counterproductive, but it’s not. Your local community bank can help you consolidate all the other troublesome debts.
Loans, no matter how big they seem, are not always bad. They can be instrumental in helping you start a farming business or expand the one that you already have. So walk confidently to your community bank with a sound business plan and start whipping your farm business into shape.
