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Your Guide to Small Business Agricultural Loans
Agriculture is the bread-and-butter of our society, providing 10 percent of U.S. employment, according to the U.S. Department of Agriculture. Yet it can be expensive to run a farm and expenses for an agribusiness can easily add up. From purchasing farming equipment to hiring employees, it’s important to have funding on hand to keep an agriculture business running smoothly. Small business loans can help you fund essential parts of your farm or take your business to the next level.
SmallBusinessLoans.com is committed to providing solutions to agribusinesses and helping them succeed. We match small business owners like you with one of our qualified lending partners to secure the loan that best suits your business. On this page you’ll learn about alternative lending options, their qualifications, and see what option might work the best for your business.
What is an agricultural business loan?
Business loans help businesses run efficiently. Agricultural loans can be used for a variety of business expenses, such as purchasing equipment, livestock, or seed. Business owners can receive up to $500,0001 to cover operating costs for their farm.
There are many loan types available to farmers from traditional lenders like banks or financial institutions, government loans such as the Small Business Administration or Farm Service Agency. Traditional lenders – such as banks or government institutions – often have lengthy applications and many requirements. Alternative lenders step in with shorter applications, flexible qualifications, and fast processing to ensure businesses get the funds they need when they need it most. SmallBusinessLoans.com partners with top-rated alternative lenders to bring you the best possible financing options for your business. Whether you need to sustain your business or increase production, there’s a financing solution that can help you get there.
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What are the different types of agricultural business loans?
There are many loan types to choose from, depending on what best suits your needs. Here we’ll outline common loan types and how the funds can be used so you can see what might work for you.
Agriculture equipment loans
For businesses that need to cover the cost of an unexpected equipment purchase or simply need to upgrade, equipment financing offers a solution. Equipment financing loans allow business owners to purchase or lease crucial equipment for their business. Any essential farming equipment, whether new or pre-owned, typically qualifies with this type of loan.
The length of a loan term is an important factor when choosing a loan and often, agricultural businesses need quick financing to get them through the off-season. Short-term loans are temporary financing solutions with most repayment terms lasting one year or less.
If your business is lacking cash flow in an off-season, a working capital loan can help cover operational expenses in the short term. A working capital loan is designed to cover everyday expenses rather than long-term assets or planning.
A microloan provides a smaller amount of funding for short-term, specific needs. This loan type is typically suited for farmers just launching their operation or looking to purchase seeds or other equipment that will grow their business. Microloans are common loan types for farmers and ranchers who need just a little financing to go a long way.
An installment loan is a general term that refers to any loan repaid on a regular payment or installment. With an installment loan, a fixed amount must be paid with regularly scheduled payments, often on a monthly or even weekly basis. Each payment includes a repayment of a portion of the principal amount borrowed and the interest payment.
Commercial real estate loans
A real estate loan is used for purchasing land, housing or commercial property. For homebuyers, this is commonly referred to as a mortgage, but an agriculture business could use a real estate loan to buy more farmland or commercial property.
What do farm loans cover for my business?
Farm loans can be used for a variety of things to help sustain your business or help expand it. You can use your agriculture loan for expenses like:
Finance farm equipment
- Keep your business running effectively with critical equipment like tractors or combines
- Buy or lease new or pre-owned equipment
Hire seasonal farm workers
- Improve production with a bigger workforce
- Prevent livestock or crop loss by having staff available around the clock
Stock up on farm inventory
- Pay for items like pesticides or seeds needed for your business
- Buy grass, hay, grains, or other animal feed for livestock in cattle and poultry farms.
Pay for farm operation expenses
- Cover every day expenses like utility bills or hardware
- Make payments toward existing debts to keep your farming business afloat.
Expand your agribusiness
- Get financing to invest in your business’s future
- Acquire more crops, livestock, or land to increase production and grow your profits.
How do I qualify for a farm loan?
Before you apply for a farming business loan, it’s important to know the loan eligibility requirements. Often, getting financing approved for your agricultural business can be challenging. But with alternative lenders, the qualifications are simple. Here’s an example of what you could need to be eligible:
- At least six months in business Minimum
- $250,000 in annual gross sales
- Fair to excellent credit
Many traditional lenders require a lot of paperwork and documentation for their loans. Some lenders even need to secure the agriculture business loan with your farm equity as collateral. But with an alternative lender, our partners keep the paperwork to a minimum and rely on personal guarantee instead of collateral to secure the farm loan. Our agricultural loan requirements are often limited to a credit check and bank statements so you can get approved for funding faster.
How do I get an agricultural loan?
Once you have an idea of what type of farm loan works best for your business and understand the agricultural loan requirements of the lender, it’s time to apply. Here’s how to secure a farm loan in five easy steps:
1. Determine The Loan Amount & Qualification
Your agricultural business determines the loan they can afford and if they meet the minimum loan qualification criteria set by the lender. Many alternative lenders require the agribusiness to be in operation for six months with annual gross sales of $250,000 or more.
2. Gather Documents & Apply
As the business owner, you fill out an agriculture loan application and provide the required financial and business documents as per the lender’s requirement. Often, you’ll be asked to provide bank statements and authorize the lender to obtain both your business and personal credit scores.
3. Wait for Lender To Review Your Farm Loan Application
The lender examines your farm loan application, your personal and business credit history, your income and bank statement among other documents. At SmallBusinessLoans.com, we pair farm owners with a lender who quickly reviews applications.
4. Review and Accept Terms & Conditions of the Farm Loan
Based on their review, the lender determines the loan amount, interest rate, and repayment terms. If you, as the business owner, accept the farm loan terms by signing a contract, the funds are then transferred to your business account.
5. Repay The Farm Loans
Lastly, your business repays the loan according to the terms of the agreement.
Apply for farm operating loans with SmallBusinessLoans.com
Whether you want to grow or sustain your poultry farm, cattle farm, or small agribusiness, fast and reliable funding is the key to achieving those goals. At SmallBusinessLoans.com, we have already done the legwork of sourcing the best lenders to work with farmers and will match you with an alternative lender that’s dedicated to your success.
We’re committed to securing funding for agricultural small businesses quickly and efficiently – so you can get back to running your business. Get started today!
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Frequently Asked Questions
Do you have additional questions about small business agricultural loans, how they work, or how to qualify for up to $500,0001 in funding? We’re here with answers.
In order to qualify for most loans, a business needs to be in operation for at least six months, have at minimum $250,000 in annual sales, and fair to excellent credit.
It is difficult to get a loan in any industry without proof of business. However, government agencies like the Farm Service Agency offer assistance to farmers launching their business.
There are many kinds of loans to best suit your business’ needs. It depends on how much funding you need, what the funding will be used for, and how long you need it. Agriculture farm loans can be used to purchase equipment, hire seasonal workers, buy more land, or general operational expenses.
An equipment financing loan is specifically designed for leasing new or pre-owned equipment and machinery. Alternatively, you could get a short-term loan to cover equipment costs and additional expenses.
Equipment financing terms can last anywhere from a short period of time to over a decade. The length of your financing term depends on many factors, including how long you plan on leasing it and the type of lender you work with.
The loan interest will vary as it is determined by several factors, including the loan type, term length, and amount.
Yes, SBA loans can be used for farm businesses and can have lower interest rates for agribusinesses. However, SBA loans require several documents to apply and often take a significantly longer time to get approved. If you need funding quickly, it is recommended to work with an alternative lender to secure financing fast.
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