Expenses are therefore considerable. Many hosts decide to take out a loan, thanks to which their coverage will not be so problematic. Sometimes, however, banks refuse to grant a loan. This happens when the farmer’s creditworthiness is insufficient. Many factors influence this. What? Let’s find out.

The basic factor that affects a farmer’s creditworthiness is the income he earns. It is obvious that in this case, it is difficult to talk about fixed monthly income because this industry is characterized by seasonality. Thus, banks check the annual income generated by a given farm.

Other loans and advances

Other loans and advances

A factor that may negatively affect a farmer’s creditworthiness is the fact that he has had commitments up to now. A person who has several loans and credits may face a bank’s refusal when he wants to take another loan. Therefore, it is worth paying off your previous debt first.

Delays in repayment of earlier obligations

Banks carefully analyze not only our current financial situation but also how it looked in the past. A farmer who is late in paying off the loan installments is much less likely to get another loan. Importantly, the Credit Information Bureau stores information on possible delays for five years. At this time, each bank has the ability to check our credit history.

Type and amount of loan

Type and amount of loan

The creditworthiness can be assessed by banks not only in terms of our financial situation but also in the type of loan that we intend to take. A farmer who decides to take out a small loan is more likely to grant it than for large amounts and a long loan period.

Therefore, finance specialists recommend incurring relatively small commitments and slow, but consistent development of the farm. The more so that every liability repaid on time convinces the bank that we are trustworthy. Thanks to this, we can count on larger amounts in the future.

Security options

Another factor that can positively affect a farmer’s creditworthiness is the loan collateral that he can offer. There are really many of them. The basic security is, of course, the mortgage. If a farmer decides to secure in the form of land or real estate, he can count on a much larger loan. He may also decide to pledge agricultural machinery or vehicles or to take out a loan with another person who has some stable income.

To sum up, those who have a high income and whose credit history has no entries with no or late repayments have the best chances for a loan. It is also worth being aware that not all banks offer loans to farmers. Therefore, a good idea is to use the help of an experienced financial advisor who will find offers tailored to your business.

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