3 Strategies to Lower the Agricultural Loan You Need to Take


Agriculture is an important economic activity in Indiana. It contributes $31.2 billion to the state’s economy. So, if you are looking to launch a farming operation or keep your farm afloat, you will find plenty of support. There are financial institutions that offer AG or agricultural loans in Indiana.

But taking out a loan may be intimidating, especially if you have never dealt with such large amounts of money before. If that is what is keeping you from applying, you can lower the overall loan amount. This way, repayments become more manageable. There are several strategies to do it. Here are some of them:

   1. Bring in a private investor

If you are afraid of borrowing large amounts of money, consider bringing in a private investor to offset some of the costs you would otherwise have incurred. You can enter into what is known as an equity partnership. In exchange for a share of your farming business, an investor will advance you some of the cash you need to run it. If you want a complete say in running your farm, then you need to bring in a passive investor. They will be a silent partner.

The advantage of bringing in a private investor is you reduce the amount of money that you need to borrow and get to distribute the financial risks in your farming business. But the major downside is that you have to give away a share of your farming business as well as the profits you generate.

   2. Lower the cost of operating the business

farm land

To lower the amount of AG loans you need, reduce the cost of operating your farm. You can opt to do more work on your own for starters. You can cut down your yearly marketing budget by promoting your products online, which is more cost-effective nowadays.

It’s also worth noting that mechanization can help reduce labor costs associated with running a farm. But to mechanize, you would need money upfront to buy machines. The workaround here is to rent or buy used farm equipment. They may not be as shiny or as durable as new machines, but good-quality used equipment are more affordable. Use them in the meantime until you generate more revenues to buy better equipment in the future.

   3. Use collateral when getting a loan

The higher the risk associated with lending money, the higher the interest rate is charged. In the end, high-interest rates can significantly increase the cost of a loan. So, if you want to reduce your repayments over the long term, consider using collateral to offset the risk. Collateral, in this case, often includes land or home equity. You can also involve a loan guarantor who will agree to pay the loan on your behalf if you default.

With a few strategies, taking out a loan and dealing with repayments can be more manageable. This loan can help grow your business significantly, which is something you may not be able to do with your savings. So, feel free to head on over to your local Indiana bank and ask about your loan options.

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