Agri-business financing
Financing agri-business is no walk in the park. As a farmer, take charge of your finances and be assertive. Borrow only what you need, shop around for the best deal, and ensure your loan term matches the life expectancy of your investment.
Cultivate strong relationships with your partners, including your lender. Determine your creditworthiness based on your capacity, character, seed capital, collateral, and business conditions. Choose a lender that is knowledgeable about farming.
Most Saccos have millions of farmers as their members, making them tailor their products to suit them. Go for institutions that are ready to develop a relationship with you and empower you to succeed. With a strong relationship, the lender will be more willing to support you when hard times come. Join a Sacco near you now!
When it comes to financing agri-business, it’s not always easy to secure the funds you need. Debt financing can come with its own set of challenges, and it’s important to be aware of them. As a farmer, you need to make wise choices to avoid getting into a debt trap. Here are some important rules to consider:
- Borrow only what you need. Borrowing more than necessary can lead to unnecessary charges and eat into your profits. On the other hand, borrowing less than you need can put you in trouble, forcing you to seek top-up loans under unfavorable conditions.
- Look for the best deal. Different lenders have different offers, so make sure you shop around to find the best deal. Lending is a competitive business, and you can benefit from that. Consider joining a Sacco, which usually offers better terms.
- Ensure your loan term matches the life expectancy of your investment. You don’t want to take out a new loan for a new car when you haven’t cleared the one for the older car.
- Cultivate strong relationships with your partners. This includes your lender. By building a strong relationship with your lender, you can ensure they have a good understanding of your agri-business, making them more supportive during hard times. Being a Sacco member can make this even easier as members can easily interact with top management. Saccos not only lend to members but also provide education and training to equip them with the knowledge and skills to run successful enterprises.
How do you determine your creditworthiness? Lenders consider several factors in determining the suitability of your agri-business loan, including:
- Capacity: Your agri-business idea is evaluated to ascertain whether your proposed business idea is workable. It would be best to do adequate research to ensure your agri-business plan is viable.
- Character: Be a person who takes commitments seriously and is willing to fulfill their pledge, especially on debt repayment. Dishonesty, lack of knowledge, and the inability to run a successful business lowers your creditworthiness.
- Seed Capital: While you can borrow the entire amount to start your income-generating activity, it would be better to demonstrate your willingness to invest by raising the required percentage before you approach your lender. Being a Sacco member means you always save regularly, making it easier to access loans.
- Collateral: Most lenders require you to have security for your loan if your venture turns out unsuccessful. With a Sacco, you have guarantors if you cannot provide enough collateral to mitigate the lender’s risk.
- Business conditions: The marketing concerns, new developments, and government policies also play a significant role in determining your access to credit facilities.
Choose the lender that’s right for you. Get an institution that is knowledgeable about farming since they will be able to address the specific needs of agri-business. Most Saccos have millions of farmers as their members, making them tailor their products to suit them. Some Co-operative Societies even organize farmers’ field days to train farmers. A lender with little knowledge about agri-business will find it challenging to understand your concerns.
Go for institutions that are ready to spend the time to develop a relationship with you. Walk with you from the start and empower you to succeed. With a strong relationship, the lender will know your abilities, the ups, and downs of your business and be more willing to support you when the hard times come. Saccos perfectly fit the description. Consider joining a Sacco near you now!
