Farmers Review Africa July/Aug 2017 Farmers Review Africa July/Aug 2017

Insights Getting your First Agriculture Loan!! Dos and Don’ts If you are looking at your rst farm loan, chances home or car is the collateral for the loan and understanding of and commitment to the success are you need some money to capitalize the start- your wages are going to make the payments, you of your business. Before you approach any lender, up of a new farm business or to increase the need to go to the personal loan department. it is important to prepare this paperwork to inventory (livestock, for example) or otherwise Even if you are starting a business, your home convince them you're a good risk. expand existing farm. may still be considered collateral for the loan and your wages may continue to make payments Lenders expect that you know your business and until your business gets oﬀ the ground then the understand your nances. e more informed challenge. Sometimes it is hard to even get in the lender may choose to move you over to the you are, the better your chances of getting the lender's door. e paperwork they need doesn't business department. Getting that rst agricultural loan can be a nancing you need seem realistic. Why do they want so much information? Why did they give a loan to that Getting approved for a loan e Five C's of Credit person and not to me? is factsheet will help Approval for a loan will depend upon how well A lender will likely use the following “Five C's” answer these questions as well as give some tips you present yourself, your business and your when reviewing your loan application. to keep in mind as you explore agricultural nancing options nancial needs. e rst step is to ask yourself exactly how much money do you need? Why do § you need it? How will you pay it back? Your Capacity to repay the loan. e lender will look at the nancial ability that you Types of loans chances of receiving a loan will depend on how and your farm has to pay back the loan Banks and other lending institutions think about prepared you are to answer these questions. based on the history of the farm, on- loans as being either for personal or for business Lenders will look at your credit worthiness, your purposes. Personal loans include a home experience and training, and business going cash ow, and assets you hold. § Capital or the money you have already mortgage or loans for a car or truck or other management skills. When reviewing your loan invested in your business. Do you have personal purchases. Business or commercial application a lender will likely use the “Five C's suﬃcient capital to support ongoing loans may be used for buying real estate, of Credit” to assess your business operation of the farm as well servicing debt? Better still,do you have enough equipment, working capital, or a line of credit for a business. Which loan department will you go to? If your www.farmersreviewafrica.com Business Plans capital to operate the farm during tough A loan proposal or business plan is the best way times? you can demonstrate to a lender your [23] FARMERS REVIEW AFRICA § Character or the general impression >>p80 July - August 2017

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