To settle, expand, convert, buy or renew equipment or sometimes absorb expenses, farmers can have recourse to credit. This solution is never pleasant but often necessary. Before signing and committing to the repayment of a farm loan, it is essential to compare and study all the options available.
When to use an agricultural loan?
We have listed them above, but the reasons for resorting to an agricultural loan can be numerous:
- The installation of a farmer who will need to invest in starting his activity: acquisition of land, farm buildings, equipment, animals…
- The development or diversification: conversion to organic, equipment change to increase production, expansion of buildings, etc.
- To absorb expenses and restore its cash flow: in a bad season where the expenses to run the operation were higher than the revenues realized, recourse to credit may be considered.
- The upgrading: the many laws that burden the farmers and ask them constantly modernize their farms can cause them to resort to the loan.
Whatever the borrower’s reason, for a loan to be useful for the operation and the operator and not to find itself in a delicate (even dramatic) situation, it is necessary to:
- That the provision of credit is bearable, that is to say, it does not entail an intolerable burden for the farmer.
- The provision of credit is adequate, that is, that it brings added value to the operation and, therefore, an improvement. This improvement may be a growth in turnover or even in the operator’s quality of life (more modern machine, recruitment, etc.)
If these two conditions are not met, recourse to credit is probably not the most suitable solution.
Commercial agricultural loans
When we talk about credit in the agricultural sector, we will first call a bank. Some banks offer loans specially adapted to the agricultural world and farmers:
- ICICI Bank,
- IndusInd Bank,
- Central Bank of India,
Some bank also offer a one-year short loan which has more the characteristics of an authorized overdraft over one year and is repayable in one go.
Before taking out a loan from one of these banks, be sure to compare the offers and make simulation requests within the various banking establishments in your region.