Farm Loans & Price Support
Farm Loans have over the years aided in ensuring that farmers can produce their crops to the maximum. The good news is that the government has come in to provide them with low-interest loans whose primary focus is towards catering for the farm expenses involved.
Another way the government contributes to farmers' welfare is through price support. This price support is a form of price controls where the government either increases or reduces prices depending on demand and supply. There are price support programs available that help farmers in business management and giving out information on the available programs. Price support forms are accessible to farmers who are looking for financial aid.
When to Consider Farm Loans
During a Startup
When aspiring farmers want to start farming and they have no capital, they can source a farm loan geared towards purchasing land. A particular farm loan will facilitate the acquisition of a targeted land.
Capital & Operating Expenses
When farming for the 1st time, it is important to have the initial capital to facilitate the whole process. However, sometimes one may not have enough funds to even cater for all the expenses involved. One can approach a financial institution or the Farm Service Agency (FSA) for a loan application.
One significant aspect of increasing the profit margin is by ensuring that adequate marketing is done. Know the target market and identify the right marketing channels for the product. However, some of these channels may require additional costs which one may not have. Therefore, acquiring a farm loan could be the next step in ensuring the success of the business venture.
Pros & Cons
Farm loans can highly be beneficial because they can boost maximum production. Below are some of the advantages of farm loans.
- They can help acquire state-of-the-art equipment that helps in crop or animal production.
- These types of loans enable farmers to improve their services on the production.
- The loans also contribute towards the improvement of certain facilities like stores or purchase fertilizers and so much more.
The downside, however, is that these loans, regardless of whether the business succeeds or not, have to be paid in full.
Types of Farm Loans
- Farm Storage Facility Loan Program (FSFL) - These loans are provided for by the government with minimal interest rates. Here, there is a list of commodities that are financed: grains, fruits, vegetables, butter and much more. Equipment is also eligible for example hay barns. The terms of the loan are between 3-12 years. For storage facilities, the loan limit is $500,000 while for the storage truck is $100,000.
- Farm Operating Loan - This type of loan is available for the daily operation of the business. They are of two natures: direct and indirect. For the indirect options, a private lender may facilitate, but the loan is guaranteed by FSA. The maximum limit for this type of loan is $1,112,000. For direct loans, the limit is $300,000.
- Farm Labor Housing - For this particular type, the FSA program provides farmers with capital for replacement or renovation of housing structures meant for the rural agricultural workers. The loans are made possible an initiative by the US Department of Housing and Rural Development.
Farm loans are easier through the FSA because it caters to farmers who have poor credit scores. To increase the chances of securing a loan from the bank, it is important to have a pre-existing account there and to have demonstrated the ability to pay any previous loans. They will check the bank account to see the pattern of transactions before deciding on the individual's eligibility.