Most small scale farmers are often faced with the challenge of raising capital for purchase of inputs or expansion of their farming business. In event of financial shortage, farmers can opt for financing from financial institutions. The common financial options available in the market include farm loans, grants, joint saving initiatives, private contracts and federal funding.
Banks often seem to attract the largest number of clients seeking financing. Due to changes in regulation in the banking industry, competition has increased among banks making them avail very competitive products to their clients. Farmers can therefore make adequate comparisons across the different debt providers while looking at important factors such as interest rates, amount of collateral and the term of the debt.
Deregulation in the banking industry has stiffened competition among the banks. This has made collateral requirements to be less stringent than in past years where a few banks were dominating the industry. This is a hugely beneficial to farmers as they can seek a lender that is able to accept their security for the money borrowed.
Please note that while governments may provide grants as starting capital for small scale farmers, non-governmental organizations have a focus on research. Applicants for such grants may therefore be required to submit research proposals on the areas that they wish to undertake research in. That notwithstanding, there are still NGOs that solely provide grants to small scale farmers so that they may fund their farming operations.
Medium term lending available from banks often last between four to nine years. They are commonly used to finance farm assets that are more costly such as expensive equipment and making farm improvements. Most of the assets financed using medium term loans are depreciable in nature over their useful life.
Repayment options for financing sought from banks and other financial institutions are flexible. Farmers can either choose to pay interest over the borrowing term then the principal at the end of the borrowing term or they could opt for making periodic payments that consist of both principal and interest. This makes it easier for farmers to choose a repayment option that they are well comfortable with.
It is ideal to keep in mind that small scale farmers can opt to form an association where they can save and obtain credit for funding their operations. The benefit with such associations is that the members can secure financing at very low costs relative to the cost they would have incurred in borrowing from other financial institutions. Additionally, it is easier for banks to lend to such associations as they have a higher credibility that that an individual has.
Solutions are available to the common financial constrain that small scale farmers face in their farming venture. Lack of finance should therefore not be a huge setback to the commencement of a great small scale farming venture. With adequate research in the financing options available within a certain locality, small scale farmers can easily find the access to appropriate farm loans and the other mentioned financing options.
Banks often seem to attract the largest number of clients seeking financing. Due to changes in regulation in the banking industry, competition has increased among banks making them avail very competitive products to their clients. Farmers can therefore make adequate comparisons across the different debt providers while looking at important factors such as interest rates, amount of collateral and the term of the debt.
Deregulation in the banking industry has stiffened competition among the banks. This has made collateral requirements to be less stringent than in past years where a few banks were dominating the industry. This is a hugely beneficial to farmers as they can seek a lender that is able to accept their security for the money borrowed.
Please note that while governments may provide grants as starting capital for small scale farmers, non-governmental organizations have a focus on research. Applicants for such grants may therefore be required to submit research proposals on the areas that they wish to undertake research in. That notwithstanding, there are still NGOs that solely provide grants to small scale farmers so that they may fund their farming operations.
Medium term lending available from banks often last between four to nine years. They are commonly used to finance farm assets that are more costly such as expensive equipment and making farm improvements. Most of the assets financed using medium term loans are depreciable in nature over their useful life.
Repayment options for financing sought from banks and other financial institutions are flexible. Farmers can either choose to pay interest over the borrowing term then the principal at the end of the borrowing term or they could opt for making periodic payments that consist of both principal and interest. This makes it easier for farmers to choose a repayment option that they are well comfortable with.
It is ideal to keep in mind that small scale farmers can opt to form an association where they can save and obtain credit for funding their operations. The benefit with such associations is that the members can secure financing at very low costs relative to the cost they would have incurred in borrowing from other financial institutions. Additionally, it is easier for banks to lend to such associations as they have a higher credibility that that an individual has.
Solutions are available to the common financial constrain that small scale farmers face in their farming venture. Lack of finance should therefore not be a huge setback to the commencement of a great small scale farming venture. With adequate research in the financing options available within a certain locality, small scale farmers can easily find the access to appropriate farm loans and the other mentioned financing options.
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