All businesses are run with a certain level of risk, but the farming industry, in particular, is subject to a lot of uncertainty. That’s where farm financing comes in which allows farmers to sustain their business and take it to the next level https://americashpaydayloan.com/title-loans-vt/. Aside from that, on top of the regular risks of a typical business, farmers are forced to deal with make or break factors every year that are essentially out of their control.
For example, an entire year’s crop could be lost due to a bad turn of weather; or an essential piece of equipment costing tens of thousands of dollars could unexpectedly break down.
Farmers of both livestock and produce are also at the mercy of the food markets. If the cost of beef or carrots goes down by 40%, it’s the farms that suffer the most.
Why do farmers need financing?
If you look at the majority of farm business models, you will see that most rely heavily on flexible access to credit. While farmers might have a lot of net worth, due to the amount of collateral that they have in terms of land, equipment, stock, etc. Most of their money is tied up in these assets, making it difficult to get by when cash flow is at its lowest.
Farming by nature is seasonal, and there are not many industries within farming that offer a constant and consistent income, which is why so many require financing on a regular basis.
Farmers need capital to buy/pay for stock, seeds, staff, equipment, fertilizers, and so on, which will eventually be used to turn them a profit. When they sell what they have farmed, the profit is used to pay back the loan, and then the rest is used to live off. Lire la suite