Farmer’s loan – is this a good idea? The image of a neglected Polish village is slowly falling into oblivion, despite the fact that many of its inhabitants still choose to work in the city. Those who decide to raise funds from land that has been inherited for generations (or bought as part of an investment) have more and more opportunities to increase their income and make a living solely from its exploitation. Not only accumulated savings, but also financing methods offered by banks help in this. Farmer’s loan – what can they count on? Which banks should you address your steps to? Let’s see.
Financial problems of farmers related to drought
Farmers in 15 out of 16 voivodships in Poland are facing severe consequences of drought. Losses are already counted in billions, and you still have to wait for financial assistance from Brussels. The Ministry of Agriculture and Rural Development has currently provided half a billion zlotys to support the most affected farmers. However, what about the other farms? The drought has affected people engaged in the cultivation of, among others: fruit bushes, strawberries, sugar beet or tobacco. Farmers who have not suffered the most damage have a chance to get a loan on preferential terms to resume cultivation. See the article below for more information.
A loan for a farmer is sometimes the only chance to start making profits from the land owned, and that is what it is all about running your own business. Every entrepreneur is aware of the fact that for a company to obtain financial liquidity, it is first necessary to invest the appropriate capital in it. People planning to start self-employment are certainly in their possession, because they have been preparing for this for a long time. However, others must look for external sources of funding. Thus, entrepreneurs have loans to companies at their disposal, and farmers – loans to farmers.
Who is a farmer?
From a formal point of view, a farmer is a person who runs a farm and uses EU subsidies. He can apply for two types of loan: intentional or for any purpose, for example the purchase of machinery (the purchase of the entire farm is also involved, but only if income is demonstrated that guarantees the regular payment of monthly installments). What gives such a loan? First of all, a chance for real, considerable profits. Provided that the whole procedure is carried out wisely. Let’s remember that agriculture is a demanding industry, in which you have to invest a lot first to bring the expected crops later.
Loans to farmers – why is it worth it?
Actually, whatever we do in agriculture, we must be aware that we are facing really large expenses. Everything is expensive: from feed, through plant protection products, not to mention machine prices. We will not overcome this. In addition, you need to be prepared for the fact that such investments do not pay back systematically throughout the year. Agriculture is an industry from which profits come seasonally. It is, inter alia, during this type of downtime that you should think about additional financing so that you do not deprive yourself of your livelihood during the rest of the year.
So before we write a loan application, let’s think carefully about what we need the money for and whether we can afford such a commitment. Experienced farmers will have much easier and easy estimation of their demand in this respect. For those who are just taking their first steps in this field, we recommend caution and compliance with the proverb to measure strength against intentions. When we have a farm of at least several dozen hectares, we divide the land into parts and deal with it gradually. We will pay a smaller commitment much faster, without burdening the budget unnecessarily. Then we can think about the next one.
Cash or agricultural loan?
The farmer’s loan operates on the basis of a cash loan. Acquired funds can be used both for any purpose (it is not necessary to disclose it to the bank), and for a specific purchase. At the same time, lenders do not exclude the third option, namely the consolidation of existing liabilities.
Farmers receive support for a loan period of up to 12 years, and the amount of funding can be up to PLN 150 – 220,000. The amount of such financial support resembles a mortgage, but in this case the applicant is not required to make any own contribution or other collateral.
However, if we prefer a cash loan, we can also get it as farmers. The procedure will look identical with one exception. Instead of proving earnings from a full-time job, we’ll show you the benefits of farming. On this basis, banks such as Pekao SA, Getin Bank or Nest Bank will calculate our creditworthiness. To this end, we will have to provide invoice income, letters from the European Union subsidy and projected future earnings from our farm. We will also prove creditworthiness thanks to the method of calculating average farm profitability – used as often as the previously mentioned solutions. The bank then analyzes the certificate from the Commune Office regarding the number of conversion hectares we have and on this basis assesses our credibility as customers.
Will non-bank loans help the farmer?
The answer to this question may disappoint. Everyone who knows the prices of agricultural goods and services, as well as the machinery used, knows that the amounts of online loans are not enough to start a farm. However, when the season has passed, and we are waiting for the next, then it is worth leaning to such financial support. Thanks to it we will ensure peace and our home budget will be slowly regenerating.
Bank loans for farmers
Among the loans dedicated exclusively to farmers, it is worth paying attention to loans targeted especially at young people, although the remaining loans can be taken on preferential terms. Loans with subsidies from ARiMR (Agency for Restructuring and Modernization of Agriculture) give the possibility of partial repayment of capital for the purchase of agricultural land, which, especially at the beginning of agricultural activity, is a serious argument. Farmers who already have some experience can also count on favorable loan offers. The interest rate usually does not exceed 2% (which is a nice change compared to cash loans or payday loans). Also, only some of them require collateral in the form of land or real estate related to agricultural activity. To learn the details, it is worth getting acquainted with the offers of Nest Bank, Cooperative Banks, BZ WBK or Pekao SA In a situation where their support is not enough, let’s think, for example, about the leasing of machines (harvesters, tractors, rakes, rotary tillers, etc.). The demand for them will not be included in the farmer’s loan application.
It is estimated that over 5 million compatriots are involved in agriculture.
Due to the fact that more and more Poles instead of working full-time choose to make profits from their land, the offers of banks directed to them are also changing dynamically. In the past they could only count on preferential loans, but now they are equally eager to choose commercial loans. The reason is trivial – they are more easily available, the loan amounts are very similar, and the repayment terms are almost identical. On the other hand, typical agricultural loans have the advantage that they are partly repaid by the state and borrowers do not face interest rates higher than 2%. A comparison of these two proposals should be the basis for deciding on the type of loan you choose.