The agricultural loan is a loan intended for farmers. Also agricultural companies are constantly faced with the situation of having to make investments. If the farmer has no corresponding reserves, debt financing must be used. The agricultural loan is tailored in several areas especially on farms.
Where can an agricultural loan be requested?
Especially commercial banks in agricultural areas are strongly represented in the field of agricultural loan. Landesbank offer agricultural loans financed by state subsidies. Very moderate interest rates are expected for these loans.
The state has set itself the task of supporting farms with strong subsidies.
Term of agricultural loan
Basically, the agricultural loan can be divided into two different areas. We speak on the one hand of short-term agricultural loan and long-term agricultural loan. Both will only be awarded to professional traders in the agricultural sector.
Short-term agricultural loans are used, for example, to buy seeds, buy fertilizers or procure animal feed. This cash injection can quickly become necessary in agriculture due to seasonal factors. Short-term agricultural loans are often run as simple bill of exchange loans.
Long-term agricultural loan usually tiled into the fixed assets of a farm. From the loan amount, new arable land can be purchased, existing buildings modernized or buildings completely rebuilt. It is also possible to purchase agricultural machinery. The loan amount from long-term loans, serves to keep the operation permanently competitive.
What distinguishes the agricultural loan from the installment loan
The agricultural loan is specially tailored to the specific characteristics of agricultural businesses. Agricultural enterprises are usually characterized by the fact that a lot of land is in business assets. These can be used as collateral for agricultural loan. Because of this collateral, consisting of land and buildings, farmers are a very popular customer group of banks. When an agricultural loan is secured with a land charge, it is also called a real agricultural loan. The conditions are accordingly good.
If the borrowers offer their machines as collateral, this will be done in the form of a security transfer. However, the movable goods initially remain in the possession of the borrower and can continue to be used.
Especially in the eradication, the banks take into account the special requirements of farmers. The income of farmers also depends heavily on external influences. If the weather does not cooperate, the harvest season can be bad and have a direct impact on the financial scope of the farmers. If, as a result of these circumstances, the agricultural loan can not be paid, repayment terms are foreseen.
If collateral is included in the agricultural loan, the Bank must determine the value of the collateral. As a rule, the value specified here is significantly below the actual market value. The banks have 3 different ways to determine the value: income value method, comparative value method and the real value method.