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All You Need To Know About Farm Management Loans

Dec 25, 2007
Loans are available for commercial enterprises and also for farming or activities related to farming. The loans are available to those who run their own farming business like a commercial enterprise. Such loans are known as farm management loans.

Farming can become a successful commercial business. However, you must consider all the factors affecting its efficiency and profitability, in order to make it a successful venture. Obviously, the principles of management should be applied to farming activity also, to make a scientific study of the farming activity as a commercial enterprise.

The important factor of this analysis that emerges is the cost incurred in the production or at the initial stage. There are two types of costs: fixed costs and variable costs. Fixed costs are the expenses incurred on machinery, equipment, infrastructure, etc. Typically, these expenses are more at the beginning. Variable costs are the expenses incur on running the operation, such as oil or fuel for the machinery, feed, supplies, etc.

First, decide the type of farming activity. The basic types are dairy, crops such as potatoes, and cattle. Poultries, vegetable, and fruit tree farms or orchards, etc. are also considered farming activities. Whatever the types, plan accordingly, execute activity in a businesslike manner, and make it a success.

Farm equipment and machinery are essential initial investments. However, it is recommended to invest on them gradually as your farming business is picking up. Dealing with fixed costs this way does not put heavy burden at the beginning when the financial resources could be limited.

There are various loan programs available. Some of the programs benefit the farmers in a direct way. Others offer loans that help the farmers meet the requirements in an indirect way. Community banks, more familiar with the farmers' requirements and more in need of customers, offer better loan programs than big commercial banks. The American Government also offers such loan programs through the Farm Service Agency of USFDA.

FSA offers Farm Loan Programs for farmers who are unable to obtain a loan from commercial loan agencies. Purchase of land, cattle, machinery, supplies, seeds, and similar basic requirements for the running of the farming activity can be taken care of with such a loan. This loan is also for the expenses incurred on activities such as construction or changes in the infrastructure, with the purpose of improving the farming operation.

The farmers who start the farming enterprise sometimes find it difficult to obtain the loans from commercial agencies, as they fail to qualify, as beginners with limited financial resources. Such farmers are benefited from loan programs offered by FSA, as their programs are intended to help the small-time farmers in the initial stages. However, FSA also offers helpful loan programs for seasoned and experienced farmers who have suffered financial losses due to natural disasters, or need economic help to expand their farming business.

Looking at all these loan programs can give you an idea about the financial help or credit that can be made available from commercial loan agencies or government agencies. The important thing is to understand that farming is like any commercial enterprise when run efficiently can prove a successful business venture. By managing your farming activities in a professional way, you can turn your farming activity into a profit-making commercial enterprise.
About the Author
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