While bad credit is something that business owners are worried about when applying for financing, there are ways to go about this and buy vehicles and machinery for your agricultural business. The type of loan offered depends on factors such as loan amount, purpose, payment history, types of credit held, etc.
Truly, your credit score is an important factor that issuers take into account, but there are other factors such as collateral or guarantee, type of business, years in business, investment potential, current trends in the sector or industry, profits, business plan, and many others. The amount of financing also depends on the tools and equipment required, i.e. loan purpose. Agricultural machinery and equipment includes:
- Blemish sorters
- Potato planters
- Weight sorters
- Shape sorters
- Grain dryers
- Rice hullers
The type of equipment required depends on the business, produce, region, climate, and a host of other factors. Some farmers choose to buy used equipment, others opt for new vehicles and machinery, and still others choose a mixture of both. The loan purpose is also an important factor, i.e. whether financing the purchase of equipment, refinancing, consolidation, etc.
There are credit unions, banks, and other financial institutions that offer financing under the Canadian Agricultural Loans Program (read more). Loans are offered to farmers who are looking for funding to develop, improve, or establish farms. Cooperatives that market, distribute, or cooperate with farmers in other ways are also offered financing. Lenders are offered a guarantee of repayment of up to 95 percent by the government.
Additional Sources of Financing
There are bad credit lenders that offer loans to farmers starting an agricultural business (read more). In this case, the interest rate will be higher and the terms less favorable compared to loans offered to customers with stellar credit. Some issuers offer business loans to borrowers with less than perfect or poor credit but require collateral. This can be in the form of agricultural equipment such as seed drills, tractors, conveyor belts, diametric and density sorters, etc. You can also offer other types of collateral such as inventory, tools, cash in your savings account, vehicles, and so on (read more). It all depends on the type of loan and amount applied for. If you don’t need a significant amount, another option is to apply for a business credit card with a large limit (read more). This way you can buy less expensive equipment and try to pay the balance before the grace period. You may want to shop around for cards with longer grace periods (e.g. 25 days or longer). If you need a larger amount, however, one alternative is to apply for a secured line of credit and offer some asset to serve as a guarantee. Again, borrowers are free to offer different assets, depending on the issuer, terms, and so on. Issuers also offer unsecured lines but they are usually available to creditworthy applicants who are perceived as less risky. There are other options as well, one being to apply through a peer to peer lending network. Another is to contact angel investors in your area and discuss your business, potential, ideas, and loan amount required.