Steps You Can Take to Strengthen your Farm Loan Application


Applying for a farm loan can seem overwhelming and difficult! How do you know what the lenders want to see? What if you don’t get approved? While we know it can be scary, there are certain ways you can maximize your chances of approval.

We help you understand these steps below.

Write Down Your Goals

First and foremost, you need goals. No lender will want to give you a loan for a farm that you have not decided how you will operate yet. You need attainable goals written out so that the lender can see your vision. These goals should be a part of your farm business plan, which is another essential part of successfully obtaining farm financing.

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Your goals, though, give the lender an idea of what you plan for the farm. Are you going to work it hard or is this something you are just giving a shot in the dark and hoping something sticks? Seeing your goals in writing will give the lender a better idea of where you stand, allowing them to decide if you are a good risk or not.

Show How Your Crops Fulfill a Need

Lenders don’t want to loan money to just another farm. They want to loan to a farm that will fulfill a need. This means you have to show demand for the crops you will grow. This should be an integral part of your marketing plan. Show the lender that you did your research and you know that your area has a need for the crops you plan to grow.

Once you know the crops you will grow, you must show how you will get them to the customers that need them. What is your advertising budget and how do you plan to use it? These are things the lender wants to see to determine what will happen in the future. Will you have a bunch of crops with no one to sell them to or do you already have a list of areas/customers that are waiting for the crops you have to sell?

Find a Niche and Talk About It

Finally, your application will be the strongest if you find a niche. Many new farmers start with herbs because many stores don’t have an abundant supply of them. Locally grown herbs are much more cost effective for stores and customers, which can give you the edge on the competition that you need.

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If you don’t plan to grow and sell herbs, do your research and find the niche that is underserved in your area and the market it to the lender. Show the lender the proof of the need in the area and then show how you plan to fill that need.

Show Your Financial Strengths

You are applying for a loan so you obviously need the money, but you have to show the lender that you have the ability to survive. They want to know not only that you can pay the loan back, but that you have the financial strength to survive. Whether you have your own savings set aside or you have the backing of family or friends, you need all of these items on paper to show the lender.

Create a balance sheet that shows your assets and liabilities and a P&L to show your profit and loss over the last year. Any research or planning you can show the lender that you have done will help to strengthen your application.

Remember, the lender is going out on a limb assuming you will succeed. You need to help them see beyond a reasonable doubt that you are a good risk. You can do this only by proving that you’ve done your research and have what it takes to succeed. It takes more than experience out in the field to be a successful farmer; it also takes a lot of financial know-how on the back end.

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