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Posts Tagged ‘Loan’

If you are a budding farmer dreaming of owning your own farm or a farmer wanting to expand or in need of money after some setbacks, then there are various options for obtaining a farming loan.

There are many banks that offer farming loans at reasonable rates of interest. Check out the rates of different banks and also check their re-payment terms before deciding. But banks will ask for collateral or guarantees which might be easy for bigger farmers. In this case it could be possible to get a loan from the government guaranteed banks, which are available through their affiliated banks and financial institutions. This department is handled by the United States Department of Agriculture [USDA] and is called the FSA [Farm Service Agency].

Getting a farm ownership loan will now become easier with the United States government proposing several changes to the rules and forms for farmers, and ranchers wanting to procure farm loans by 1st January-2008.

This means that there are fewer pages in the code of federal regulations and less forms to be filled up. Previously there were 40 instruction manuals which have been replaced by 6 handbooks and all the forms are now available online. The new program rules will be applicable from 1st January-2008 and until then the old rules will apply according to FSA.

You too can get a loan from your local bank or financial institution in your area, which is authorized by the government to do so. They advance you the money to take over a farm i.e. take over the land and all fixed assets such as any constructed buildings on it as well as the plant and machinery on it. They also lend you money to purchase new farming equipment and other improvements, which may be needed to improve the water and soil quality and ensure conservation.

These loans can also be used to purchase livestock, their feed and seeds for farming. FSA Loans are provided to new farmers who might not qualify for a loan from regular banks or financial institutions. Regular banks ask for guarantees and collateral which not everybody might be able to furnish. Even regular farmers who have limited finance or have suffered losses due to natural disasters can qualify for this loan. You can go to their website or approach your local bank or institution authorized by them for details of obtaining a loan. The government guarantee is given to these authorized banks to repay most of the loan if the farmer is unable to do so.

You can also take the services of a farm loan broker who can assess your needs regarding the amount of loan you require and the re-payment period etc. He can then get you the best loan possible at the best interest rates since he would know about the available options. His knowledge will benefit the both of you and help you in getting a loan faster.

Thus owning and running your own farm will no longer remain a dream and you too can avail of a loan to get your own farm started and running.

If you are a farmer or rancher who requires a loan, then depending on your current financial condition, there are many options for you to avail of.

If you have sufficient collateral or a guarantor, then you can apply for a loan through a private bank or commercial lender. They will normally require collateral, which is around 50 percent more than that of the loan amount. If you have collateral and sufficient down payment, then the interest rate will definitely be quite low. Go to different banks and compare their rate of interest on the loan and also any other charges that may be applicable to that loan.

Some banks also have a re-payment scheme in which the first year installments are lower, giving you a lead-time to stand on your feet. If you do not have sufficient collateral, or have suffered losses in farming due to natural disasters such as flood, drought, etc. then you can try getting a loan from the government organization FSA i.e. the Farm Service Agency. These loans are provided to farmers who do not have much collateral. If you are a beginner, then these loans range from $200,000.00 to $949,000.00. The United States Government guarantees the loans.

You can also employ the services of a reputed and experienced expert farm loan broker, who can help you after assessing your loan needs. He can then guide you to the best lender who can lend you the maximum amount of money at the lowest rates of interest. His contacts in the field can help you to secure a loan in the least amount of time and he can even guide you in buying and leasing of farm equipment and machinery. If you have limited knowledge about the procedure and documents needed to apply for a loan, then the farm loan broker is the best way to go in for one. The farm loan broker might also not take any brokerage from you since it is normally the lenders who pay his charges. But it is better to check everything with him before applying through him.

You can also check out private lenders who advertise in your neighborhood and also on the Internet. You can get their quotes and compare their rates and re-payment terms. Go through an experienced farm loan broker to read between the lines of the loan agreement.

Wherever you apply for a farm loan, it is important to have a detailed plan. It should clearly state your list of collaterals, if any, the purpose of your loan i.e. to purchase land, equipment, livestock, seeds etc., and the period for which the loan is required. It should also state as to when you expect to break even and start generating profits. If you have any other pending loans, then details of those should also be provided. If you have been unable to pay off a previous loan, then there are no chances of getting a fresh loan. So be sure to get your facts right before applying.

Many times, ranchers and farmers cannot acquire commercial credits from the Farm Credit System institutions, banks, or lenders for that matter. In such cases, they can opt for a farm operating loan that is offered by the United States Department of Agriculture Farm Service Agency (FSA). It makes direct and guaranteed farm ownership and operating loans to farmers and ranchers who cannot obtain commercial credit from the banks, or other lenders.

When borrowers are unable to repay their loans, FSA resolves the delinquency, using various tools like debt forgiving. According to the Federal Agriculture Improvement and Reform Act of 1996, FSA cannot make loans to borrowers who have had debts forgiven previously.

Program Description

The Farm Service Agency (FSA) provides farm-operating loans to ranchers and farmers who are unable to obtain commercial, private credit for the time being. Operating loans may be used for purchasing items required for successful farm operations. The items could consist of farm equipment, livestock, seed, feed, farm chemicals, fuel, insurance, repairs, and various other operating expenses.

Both direct loans and guaranteed loans are available through the program. Eligibility for each type of loan depends on applicant qualifications. According to the terms of the guaranteed loan program, the FSA guarantees loan made by a standard agricultural lenders for about 95% of the principal loan amount.

People who have not been able to qualify for guaranteed loans can qualify for a direct loan. Other than servicing and making the direct loans, the FSA officials also provide credit counseling and supervision to borrowers. For this they should be able to justify their ability to repay as well as offer assurance for securing the loan fully. Borrowers can take a direct farm-operating loan up to $200,000.

Eligibility criterion for obtaining a farm operating loan (OL) from the Farm Service Agency (FSA)

. Should be a permanent resident or a US citizen

. Should not have a history of delinquency on any Federal debt

. Should not be responsible for loss to the Government because of a previous forgiven Federal debt

. Should have a good history of repaying debts

. Should not be included in any convictions related to controlled substance

. Should be the operator of any “family-sized farm” after loan closure

. Should not have any outstanding judgments

. Should not be able to obtain credit elsewhere

. Applicants should have sufficient money for the loan repayments and ample collateral for securing it fully. The additional eligibility criterion is also applicable and can be retrieved by contacting FSA or visiting the Farm Service Agency website directly.

Loan Terms

The duration for loan repayments for both guaranteed and direct farm operating loans cannot go beyond 7 years. While loans for livestock and equipment purchases are programmed for repayment for long periods, but cannot go over 7 years, loans for annual operating expenses are usually settled up within a year. Direct operating loan interest rates are finalized on the basis of the Government’s cost of funds. In certain circumstances, FSA can offer 4% interest rate to farmers who are unable to pay for the lender’s standard rate of interest. For almost all guaranteed loans, FSA levies an origination fee up to one percent of the guarantee.

Loans are available for commercial enterprises and also for farming or activities related to farming. The loans are available to those who run their own farming business like a commercial enterprise. Such loans are known as farm management loans.

Farming can become a successful commercial business. However, you must consider all the factors affecting its efficiency and profitability, in order to make it a successful venture. Obviously, the principles of management should be applied to farming activity also, to make a scientific study of the farming activity as a commercial enterprise.

The important factor of this analysis that emerges is the cost incurred in the production or at the initial stage. There are two types of costs: fixed costs and variable costs. Fixed costs are the expenses incurred on machinery, equipment, infrastructure, etc. Typically, these expenses are more at the beginning. Variable costs are the expenses incur on running the operation, such as oil or fuel for the machinery, feed, supplies, etc.

First, decide the type of farming activity. The basic types are dairy, crops such as potatoes, and cattle. Poultries, vegetable, and fruit tree farms or orchards, etc. are also considered farming activities. Whatever the types, plan accordingly, execute activity in a businesslike manner, and make it a success.

Farm equipment and machinery are essential initial investments. However, it is recommended to invest on them gradually as your farming business is picking up. Dealing with fixed costs this way does not put heavy burden at the beginning when the financial resources could be limited.

There are various loan programs available. Some of the programs benefit the farmers in a direct way. Others offer loans that help the farmers meet the requirements in an indirect way. Community banks, more familiar with the farmers’ requirements and more in need of customers, offer better loan programs than big commercial banks. The American Government also offers such loan programs through the Farm Service Agency of USFDA.

FSA offers Farm Loan Programs for farmers who are unable to obtain a loan from commercial loan agencies. Purchase of land, cattle, machinery, supplies, seeds, and similar basic requirements for the running of the farming activity can be taken care of with such a loan. This loan is also for the expenses incurred on activities such as construction or changes in the infrastructure, with the purpose of improving the farming operation.

The farmers who start the farming enterprise sometimes find it difficult to obtain the loans from commercial agencies, as they fail to qualify, as beginners with limited financial resources. Such farmers are benefited from loan programs offered by FSA, as their programs are intended to help the small-time farmers in the initial stages. However, FSA also offers helpful loan programs for seasoned and experienced farmers who have suffered financial losses due to natural disasters, or need economic help to expand their farming business.

Looking at all these loan programs can give you an idea about the financial help or credit that can be made available from commercial loan agencies or government agencies. The important thing is to understand that farming is like any commercial enterprise when run efficiently can prove a successful business venture. By managing your farming activities in a professional way, you can turn your farming activity into a profit-making commercial enterprise.

In order to satisfy the ever-increasing demand of the consumers, it is important that the farmers use agricultural equipment to speedup the process to keep up with the consumer demands. Farm equipment plays a very important role often acting as a deciding factor for any agricultural activity for that matter. However, it is not always possible for the farmer who usually has limited funds at his disposal, to get the farming equipment of his choice. Therefore, it doesn’t matter whether you are the small individual farmer or the boss of an agricultural business, it is important that you know about the various finance options available with respect to purchasing agricultural equipment.

When it comes to agricultural equipment financing, you have two options, i.e., equipment loans and equipment leasing. The equipment loans are usually granted to those farmers who have a brief history in the business of agriculture. These loans also depend upon the credit worthiness of the farmers seeking the agricultural equipment loans. This means that it is pretty difficult for those who have just entered the agricultural scenario and looking for some equipment loans. Due to these constraints, most of the new farmers seek the alternative of equipment leasing.

However, times are now changing and the interest has slowly shifted towards to the broader aspect of loaning equipment, rather than leasing. One of the best things about equipment loans is that the process is pretty simple. Equipment loans are just like the car loans that you find in the market. Just like any other loan, in the case of equipment loans too, the equipment is kept as security. This means that incase of any default in the payment of the interest or the installment of the loan, the equipment is simply repossessed. Therefore, in order to secure the most attractive loan option, it is important that you choose the one that offers low rates of interest, an affordable debt ratio, etc.

It is very essential that you start your farming activities with some good equipment, unless you are already part of a large organization or a tycoon. However, in case you are a small farmer even the start up process may feel like an impossible task for you and the main root of this problem is lack of the start up capital. There are many institutions that provide equipment loans which may include equipment used for handling the ranch, row crop, etc.

They would also include the high-end industrial equipment used for agro business activities such as applicator levelers, feeding mills, ginning equipment and other equipment used for the purpose agricultural and other agro based activities. A major advantage of equipment loans is that many financial institutions provide them at fixed interest rates and the period of repayment is decided upon the convenience of the farmer according to the Equipments and Farm Implement Financing Program.

One of the best things about equipment loans is that you can find many of them at attractive rates of interest on the Internet by conducting a simple research. There are many financing agencies that are working online in this respect. One important aspect to be kept in mind when opting for any equipment loan is that you need to compare the interest rates offered by various agencies in order to get the best deal.