What is Farm Finance? A How-to Guide For Beginners
The agriculture sector plays a crucial role in our country’s economy and sustenance, providing essential food supplies and employment opportunities. For farmers and agribusiness owners to continue their important work, they need the requisite financial backing to maintain production. Unfortunately, agri-lending remains unnecessarily complicated when the goals and benefits involved are essential to all.
Many common questions fall under the farm finance umbrella. We’ve developed this comprehensive how-to guide to help farmers and agribusiness owners better understand the nuances involved.
What Do Farmers and Agribusiness Owners Need To Know About Lending?
The needs of farmers and agribusiness owners will vary depending on whether they already own a farm and need capital for expansion or improvements or if they are looking to begin their farming endeavours by securing funding to purchase land, goods, livestock, and equipment for farming.
Here are the main questions MMARCLS clients have regarding agriculture lending.
What is Agricultural Business Finance?
Agricultural business finance focuses on everything related to how farmers and agribusiness owners find and obtain agri-lending. From determining the value of untouched land to the prospects of expanding farming operations, there is value in everything and learning how to properly appraise assets or items of sale is essential in the lending process.
In addition, it is important for those in agricultural business finance to understand local laws, regional lending practices, and more. The climate, topography, and tradition of crops grown or animals raised are vital to understanding what does and does not work for farmers and agribusiness owners seeking funding.
What is Farm Finance?
Simply put, farm finance refers to how farmers and agribusiness owners fund their farming business, whether a family-owned plot of land, a small business venture, or a more complex industrial farming practice. It is all agriculturally related but varies in scope and financial need.
An important point for farmers and agribusiness owners to note when researching funding options is to find lending firms with a history of experience and success in the
agricultural finance lending vertical. At MMARCLS, we have an established relationship with a wide variety of quality lenders, all of whom specialise in financing Australian farming endeavours.
When you connect with us, we’ll provide you with access to these lenders, ensuring a partnership that nurtures your unique business needs.
How to Finance a Farm in Australia
Being new to the industry should not be a barrier for prospective farmers and agribusiness owners. Instead, agricultural entrepreneurs should understand farm finance in Australia to move toward a successful business venture.
The most important step in financing a farm is communicating with lending institutions to find the best value and loan rates available. AT MMARCLS, we work with agriculture clients to help them understand their borrowing options, personalising solutions to help meet Australia’s unique farming demands.
How to Finance a Small Farm
Small farms are the heart of farming and just as valuable to food production as the industrial farming sector. However, small farmers and agribusiness owners have different needs than those of larger-scale enterprises.
When it comes to farmers and agribusiness owners, lenders consider the type of land and farming operations to determine the most appropriate funding. If a loanee is at the beginning of their farming career, a smaller loan may be suitable to avoid overextending credit, whereas seasoned farmers or those with desirable credit may qualify for greater funding.
We’ll work with you to determine the appropriate loan options for your venture and connect you with quality lenders who can support your farming goals.
How to Finance Farmland
Purchasing farmland differs from buying residential or commercial land. You must factor in various necessities, including long-term growth and potential pitfalls that can hinder success. This may include things like droughts, floods, or fires that pose risks to crops or livestock. While we can’t predict such events, farmers and agribusiness owners need to understand the potential risks and adjust their loan requests accordingly.
Some key factors to consider include:
- Property value
- What deposit amount can you reasonably cover?
- Do you have a favourable credit history and worthy assets?
- Does your business plan outline a realistic potential for continued growth?
How to Finance Farm Equipment
An agricultural loan can help Aussie farmers and agribusiness owners finance much-needed farm equipment. Farm operators need high-tech machinery and heavy-duty vehicles to bring their harvest to market and make a profit. An agriculture loan can help you accomplish that.
In preparation for a loan request, aspiring farmers and agribusiness owners should itemise the equipment they will need to run their operations. It is important to note that due diligence is essential to understand everything you’ll need on a day-to-day basis. Understanding your overall expenses will assist you in requesting a suitable loan amount. Factors to consider may include:
- Tractors
- Combine harvesters
- Ploughs and harrows
- Seed drillers
- Irrigations systems
- Feritliser spreaders and pesticide sprayers
- Balers
- Workshop tools
- Storage facilities, such as silos
- Livestock management tools and technology solutions
What is an Agricultural Loan?
An agricultural loan is a type of financial service designed to help farmers and agricultural business owners succeed and manage their operations smoothly. These loans are available from different sources, including both government and private organisations, all aiming to encourage advancement and creativity in the agricultural sector.
Agricultural loan categories farmers and agribusiness owners may obtain include:
- Emergency loans
- Farm ownership loans
- Microloans
- Operational loans
- Youth loans
How To Get an Agriculture Loan
Farmers and agribusiness owners must follow a series of steps to obtain an agriculture loan. It is important to adhere to this guidance to avoid delaying the loan approval process.
- Collect the required documentation, including personal and business financial records (the latter applies if currently operating a farm).
- Gather a finalised business plan and any operational plans for current farms.
- Meet with loan experts, such as MMARCLS, to discuss lending options and further requirements.
How to Get a Loan For an Agriculture Business
Farmers and agribusiness owners looking for lending options should start by understanding their loan eligibility. Here are some points to consider:
- Australian citizenship or residency
- Assets for collateral
- At least 50% of income must be earned from the farm business
- Earn or plan to earn at least 50% of the income from the agriculture business
- Contribute a minimum of 75% of labour to the agricultural business
- Contribute or intend to contribute at least 50% of personal labour to the business
Where Should Australian Farmers and Agribusiness Owners Go For Lending Services?
Knowing where to go for an agriculture loan is a critical first move for any farmer or agricultural professional. When working to secure capital for a farm purchase, expansion, equipment, or upgrades, it is imperative to seek guidance from a trusted expert.
MMARCLS specialises in helping farmers and agribusiness owners secure high-quality loans for their farming endeavours.
Contact us for expert advice and customised loan solutions today.