Are you ready to buy that farm you've been looking at? First, you'll need to apply for a loan. This can be confusing for people who don't have a lot of financial experience, so it's a good idea to break down a banker's expectations into models that are easy to understand. Before you approach a credit union or loan office, use the five Cs to think about your situation - Capital, Capacity, Conditions, Character and Collateral.
Capital
Simply put, this is how much money you have on hand at the moment. This has a big impact on the line of credit that you'll be able to get, so the more cash on hand, the better.
Capacity
This refers to your capacity to repay a loan. It is affected by your loan history and credit rating, so people who have been good with bills in the past will have more luck securing a good farm property loan.
Conditions
Think about the economy in general and the type of farming you're interested in specifically. If there are a lot of farmers working with a certain crop in your area, banks might not think it's a very good investment.
Character
What kind of organization do you want to start? Knowing the basics about how a farm will be run (and proving it to a loan officer) is a good way to appeal to creditors.
Collateral
Unfortunately, banks want to make sure that even if they make bad investments, they'll be able to get some of their money back. Collateral refers to houses, equipment and other items that creditors can reclaim if a farm ends up not working out. Even a sound business plan and good investments need to put up collateral, so think about what assets you have that can serve this purpose.
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