Steps to Get the Loan for Your Farm Business Needs

The Farm business is often different from traditional businesses, in the sense that it usually needs access to agricultural land, agricultural tools, products like fertilizers, seeds, insecticides, and overheads including storage and transportation. Besides, every farm business whether it is animal farming, fish farming, horticulture, silk farming, apiculture, aquaculture, floriculture or eco-tourism farming is inherently distinct in numerous ways and has its own set of needs accordingly.

Since agriculture has been the primary source of employment in India for decades, the Indian government recognises the importance of this sector and its allied businesses, and therefore ensures adequate credit flow towards farm businesses, with the help of commercial banks, co-op societies, and rural banks. Moreover, over the years the government, through its comprehensive agricultural policy has taken adequate measures to ensure that farmers and farm business owners qualify for priority sector lending, that too at minimum possible interest rates.

This helps agri-business owners gain access to the requisite bank loans, for various purposes including but not limited to –

• Purchasing Land
• Managing Operations
• Purchasing Farm Machinery
• Purchasing or Hiring Storage Facilities
• Purchasing Cattle
• Purchasing input Products
• Supply Chain Management
• Marketing Products
• Expansion of Business
• Enhancing the Viability Of Small and Marginal Units

Steps to Get Loan for Your Farm Business

Now let’s find out how to acquire capital and grow your farm business. Let us take a quick look at how you can do so.

Step 1 – Analyse Your Needs

Since agri-business loans are readily available such as Axis Bank business loans, and that too at a comparatively low-interest rate, you may be tempted to take on a larger amount than you require. However, at this point, it is essential to remember that even an easily accessible loan is still a form of debt, and it is in the interest of your business that you have the minimum possible debt. Not only will this make you financially independent at the earliest possible, but will also ensure, that you still have some borrowing capacity, should you need any additional funds in the near future. Hence, it is highly recommended that you arrive at a loan amount that you essentially need, and borrow only as much.

Step 2 – Arrange for the Documents

Most banks, including commercial, cooperative and rural banks, all have very minimal requirements when it comes to the documentation for approval of Farm Business Loans, in a bid to aid quick processing and disbursal of the loans. However, you must be prepared with the following documents to ensure hassle-free processing of your loan.

• Proof of Identity – This can be in the form of Ration Card (with the photograph), Voter ID, Aadhar Card, Driving Licence, etc.
• Proof of Residence – This can be in the form of Ration Card or Aadhaar Card
• Proof of Ownership of Land, or Revenue Receipts or Records of Rights
• Kisan Credit Card

While these are some of the documents primarily required by banks to process your loan application, there may be some additional documents that your bank might ask for, depending on the type of loan you are applying for, and the bank that you are approaching.

Step 3 – Check for the Loan Eligibility

In most cases, banks offer agri-business loans to all types of farmers provided they are between 18 and 65 years of age. However, the eligibility requirements may vary from one bank to another, as well as from one loan type to another. Make sure you approach the bank you are willing to take the loan for and inquire about their eligibility criteria.

Step 4 – Take a Look at the Interest Rates

The interest rate for farm loans is usually capped at 9% per annum. That being said, in a bid to offer short-term credit at an affordable rate, thus boosting farm output, the central government usually offers an interest subvention. For instance, as per the 2019 Budget, a 2% subsidy is available for Short-Term Farm Loans of up to Rs. 3 lakh, bringing down the rate to 7% per annum. Furthermore, to encourage prompt repayment of the loan amount, farm loan borrowers are being provided with an additional incentive of 3%, thus making the effective interest rate as low as 4% per annum.

Such subvention can usually be availed when the loan is taken from Public Sector Banks, Private Lenders, Cooperative Banks, and Regional Rural Banks. Besides, the government also offers this subvention to NABARD, which further refinances Regional Rural Banks as well as Cooperative Banks.

When it comes to crop loans, loan amounts of up to Rs. 1 lakh is exempt from the need for collateral. For loan amount exceeding Rs. 1 lakh, the borrower may need to pledge an asset as per the terms laid down by the lender.

Depending on the type of loan you want and the type of business you wish to acquire the loan for, the interest rates may vary. Hence, it is recommended that you get in touch with your bank and get the complete information regarding the same.

Step 5 – Apply for Business Loan

Now that you have all the information as well as the documents in place, it is time for you to file your loan application for your farm business. More often than not, you will come to know of the approval status within a week. If approved, you can expect the amount to be disbursed within 8-10 days.