What is Agriculture Loans?
Agricultural loans are availed by a farmer to fund seasonal agricultural operations or related activities like animal farming, pisci-culture or purchase of land or agricultural tools. This type of loan also helps buying inputs such as fertilizers, seeds, insecticides etc.
Agriculture Loans In South Africa
Agricultural loans are availed by a farmer to fund seasonal agricultural operations or related activities like animal farming, pisci-culture or purchase of land or agricultural tools.
This type of loan also helps buying inputs such as fertilizers, seeds, insecticides etc.
Below are Ways An Agricultural Loan Can Help Farmers Grow
How do you decide how to use your agriculture loan?
Here are ten options to consider:
Before you even apply for an agricultural loan, you’ll want to plan how to spend the money. What resources will most benefit you and keep your business running? How much do you need to borrow? You’ll need to have these plans in place before you obtain the loan, as they will ensure that you use the loan in the right way.
So how do you decide how to use your agriculture loan? Here are ten options to consider:
1. Buying Farm Equipment
You can’t run a farm without specialized equipment. From tractors to irrigation systems to silos, your business is only as good as the equipment you use. High-quality, reliable equipment lasts longer and will make your job easier, but it comes with a hefty price tag.
If you’re just starting out in the agriculture business, you may significantly underestimate the price of specialized equipment. Before you over (or under) commit, thoroughly research the costs and options for the equipment you’re going to need and make sure it fits into your business plan.
2. Purchasing Supplies
What do you need in order to grow crops?
Seeds and dirt! If only it were that simple to get your farm off the ground! However, you also need equipment (as we previously discussed), fertilizer, harvesting tools, and money for these and all the other costs associated with starting a cash crop.
Your agriculture loan can help you get off on the right foot by enabling you to purchase necessary supplies, whether that’s a truckload of heritage tomatoes or a herd of Heifer cattle.
3Covering Land Costs
Agriculture loans can be used to purchase or lease land. The ins and outs of purchasing farmland can be tricky, and the land you need will depend on the type of farming you plan to do.
You’ll need to work out what kind of land and how much of it you need and how much it’s going to cost so you can decide how much to borrow.
How do you qualify for an agricultural loan?
Qualifications for an agricultural loan differ for each lender, but there are some typical requirements including a healthy FICO score, a detailed business plan that outlines how the funds will be used, and a minimum down payment.
Many additional factors are considered by lenders, such as the borrower’s farming experience, and eligibility requirements will vary.
Why do Farms Need Loans in South Africa?
South Africa is a country with limited fertile land. This means that farmers need to work hard to strengthen the fertility of their land so that their crop yield is sustainable.
All of this work can be translated into money. Farmers need money to make their land operational and 56% of the financial source for agricultural business is banks.
How to Get a Loan to buy Farm?
There are many farmers that work a land they do not own. If this is your case and you want to put your knowledge to work for you and your family you should definitely read what we’re going to tell you now.
Land Bank is a commercial bank that specializes in the field of agriculture. They offer different types of loans, and among them you can find loans to buy a farm. Before we move on, let us make it clear that this company does not offer grants or subsidies; Land Bank offers loans. What do we mean by this? If you take out a loan with them, you will have to pay it back.
Land Bank has designed a credit line called Financing for Farming and Agri-Enterprises in order to assist South African farmers in their financial needs.
With this loan you can buy a farm or machinery that you will need to make it operational. You can visit the bank to start your loan application process.
Where can you Find Loans for Livestock Purposes in South Africa?
In South Africa, 69% of the land is appropriate for grazing. This makes livestock farming the biggest agricultural sector in South Africa. Livestock farmers might need finance for many reasons; one of them may be the need to expand their business.
First National Bank offers a medium-term loan to help farmers finance their livestock and production. The loan amount can be repaid in up to five years. This loan can be used to finance the production, to purchase machines or instruments and to make improvements in the farm.
What other Opportunities other than Farming Loans are there in South Africa?
Rich countries know that agriculture is the foundation of a thriving economy and for this reason they spend billions to subsidize the sector. This can turn into a challenge for developing countries such as South Africa since it is hard to compete against subsidized farmers around the world.
Farmers in our country are not subsidized and usually have to turn to agricultural loans to find the finance they need. However, there is an opportunity for a grant provided by the government.
This program is called Land Redistribution for Agricultural Development. This grant is for the purchase of land to farm; the amounts range from R20 000 to R100 000.
It should be made clear that this is not a subsidy; we are talking of a grant that involves a contribution of a minimum of R5 000 on the part of the farmer.
To find more information about this grant you should contact the Department of Agriculture, Forestry, and Fisheries.
5 Qualification Criteria you should Meet for Farming Loans In South Africa
The agricultural loans offered in South Africa are not subsidies and are not managed by the government. This means that the companies that offer these financial services need to make a profit, just like any other company. In order to guarantee that their credit business is profitable, they will make sure that your farm unit is sustainable and that you will be able to repay the amount you borrow.
The only way for the bank to have some assurance that you will pay is asking you to meet certain requirements and qualifying criteria.
In this article, we talked about different agricultural credit institutions since we wanted you to have an idea of the options you have. Each of these banks will have their own requirements and qualification criteria. However, some of these items are asked by most banks.
These are the 5 qualification criteria you will be generally asked to meet:
- Being a South African citizen or a permanent resident of the country
- Having a clear credit history
- Providing the bank with your business plan
- Providing some kind of security
- Proving that you can afford to repay the loan
The main agricultural loans offered by reputable finance companies in South Africa were discussed in this article. Also, the general requirements asked by these companies were listed so that you know if you can apply for these loans or not.
Which bank is best for agriculture loan in South Africa?
Land Bank has designed a credit line called Financing for Farming and Agri-Enterprises in order to assist South African farmers in their financial needs.
With this loan you can buy a farm or machinery that you will need to make it operational. You can visit the bank to start your loan application process.
How can I get a farm loan in South Africa?
Applicants who want to farm may apply for an LRAD grant, but have to make a contribution, either in cash or in labour, to a minimum of R5 000 – more if the grant is larger. Grants vary from a minimum of R20 000 to a maximum of R100 000. Individuals or groups may apply.
Where can I get agricultural funding in South Africa?
8 funding opportunities for farmers
Land Bank’s financing for farming & agri-enterprises.
Integrated food security and nutrition programme.
Umsobomvu Youth Fund (UYF)
South African Breweries (SAB) fund.
National Development Agency (NDA) grants.
AgriBEE Fund.
Land Redistribution for Agricultural Development.
AGRA grants.
Which farming is most profitable in South Africa?
Macadamia nuts are hard to beat when it comes to the most lucrative crop per land area used in South Africa. According to statistics from the SA Macadamia Growers’ Association (Samac), the average export price for macadamia kernels in 2017 was R224.