Getting the tools and equipment you require as a farmer might be challenging, and the expenses can be astronomical and would likely take away from money that would be better used for other priorities. Both individuals who are already operating an agriculture business and those who want to establish one will find it challenging.
So if you have an excellent agriculture business idea and are now looking for financing options, then you have come to the right place.
Whether it’s a small-scale backyard business or a startup that requires huge capital investment, funds are crucial to set things in motion.
Well, in India, your ingress into the agri-business world is fairly hassle-free. Yes, thanks to the easy availability of business loans for agriculture. Here is a guide to understanding how to get agriculture business finance in India.
Features of agriculture loans
As an agricultural business owner, you can receive financing not just for crop cultivation but any agriculture-related activities. This includes animal husbandry, garden crop cultivation, floriculture, aquaculture, silk farming, bee-keeping, and securing resources such as fertilizers, machinery, agricultural equipment, etc.
You can apply for loans to run your daily operations, purchase land, expand your business, buy the latest equipment, market your products and services, protect inventory, and more.
The agriculture loans can help you pay for the land costs you might incur if you’re planning to purchase more farmland or increase the amount of property you already own. These business loans can be short, medium, or long term.
As per the Reserve Bank of India (RBI) guidelines, you can get a collateral-free loan for up to Rs. 1 lakh. For loan amounts exceeding that, the collateral requirements depend on lenders.
Furthermore, the simplest and least amount of paperwork is required to obtain agriculture loans.
How to apply for agriculture loans?
Before applying for an agriculture loan, it is crucial for borrowers to have clarity on how much money they need, why they need it and how they are going to pay it back.
The agricultural loan application process varies for different lenders. Nowadays, you can apply for loans online as well. However, before approaching a lender, it is crucial to research business loan interest rates, benefits, loan tenure, eligibility, features, and terms and conditions. After comparison, the borrower can choose the most suitable lender to them according to their needs.
Besides, borrowers must read the fine print and look for hidden costs beforehand. The standard procedure involves filling a loan application and the KYC form and attaching necessary documents.
Here are the common documents required for agriculture business finance.
- Passport size photographs
- Identity proof such as Aadhar, PAN, Voter ID, ration card, etc.
- Address proof such as passport, electricity bills, water bills, etc.
- Income proof, bank statements, ITR filing, etc.
- KYC documents
- Quotations from vendors for equipment purchase
- Land ownership proof if applicable
Also, be aware that your lender may require some additional documents. So, make sure you have all the documents before applying for a loan. Knowing what documents you will need when applying for a loan can help you make the process much easier and quicker.
Additional Read: How to Submit Your Business Loan Documents like a Pro and Get Them Approved?
How to increase your odds of getting a loan?
Before issuing a loan, lenders assess the business’s credit score, which certifies the dependability and ability of the business to pay off debts. Lenders are more likely to have faith in a company’s ability to repay loans if it has a good credit score. Several lenders offer competitive interest rates for consumers with a strong CIBIL score.
Therefore, to improve your business finance eligibility, you must build a good credit score, preferably between 700 and 900.
Besides, keep your credit history debt-free and pay off any existing liabilities and loans before opting for a new one. While applying, prepare a written detailed plan on how you plan to use the funds.
To conveniently repay the loan, take into consideration potential profits, account losses, and decreased profits. Use a business loan EMI calculator to calculate your EMIs and interest payable and plan your repayment in advance.
Moreover, always apply for a loan best suited to your business’s financial requirements. If you file multiple loan applications, it can affect your credit score negatively.
From a future perspective also, it is essential that you take out a loan that is needed and that you are capable of paying. Applying for a loan amount that you might not be able to repay on time otherwise results in a low CIBIL score, which may hinder your ability to borrow money from your lender in the future.
Additional Read: Does Good CIBIL Score Guarantee SME Loan Approval?
Parting thoughts
Agriculture-related industries have a lot of room for expansion, especially with financial assistance from the government and banks, as well as technology advancements made by agribusiness. And by 2027, it is anticipated that Indian agriculture will generate INR 142,280 billion. Therefore, if you have been putting off starting your farm business due to lack of funds, stall no more and apply for an agriculture loan.
Many lenders support agriculture businesses by providing quick business financing. Conduct thorough research, display a strong repayment intent, and maintain a good credit history to secure your agriculture loan.
Finance your agriculture business with Tata Capital!
We offer security-free multi-purpose financing with easy business loan eligibility. Our loans are customized to fund varying business needs at competitive interest rates. Enjoy simple documentation requirements, structured EMI plans, and extended loan tenures.
There’s no time better than now to turn your dream into reality, especially when it comes to agriculture. Apply now!
21 November 2024
5 mins read
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