AG Operating Loans 101: Everything You Need To Know About Them

Although running a farm may feel carefree at first, it can be troublesome financially as uncertainties brought on by natural disasters could be detrimental to the business. Not only this, as even the outbreak of COVID-19 has incredibly stressed agriculture, causing production to become unstable. Nevertheless, agriculture will always bounce back as it is an asset that continuously accumulates capital.

Likewise, you can always find uncertainty in every business – so it’s best to be prepared. With preparedness in mind, the best route to go for is to take out an agricultural loan. By doing so, you help keep your business afloat even with natural disasters or uncertainties – and what way to go for than with an ag operating loan:

What Is The Ag Operating Loan?

You can think of loans as a lifeline for your agricultural business. This loan is revolving, which means that you can borrow money to an agreed limit whenever you’re in need. After you’ve repaid the amount, you can borrow the agreed limit again. You can borrow money if you need to purchase seed, fertilizer, even labor or tillage.

Although most loans need to be reviewed and renewed annually, there are a few exceptions. With this, it’s best to check your loan offers to keep you assured in the long run. You could even look up Ag Operating loans if you want to obtain a loan that offers flexible solutions without annual paperwork. Here, you’re given practical approaches that may help your business either short or long-term.

What Is The Loan Good For?

When you apply for a loan, you can use it to buy land, purchase materials, or even expand your operations. Likewise, it can help you during unforeseen events like natural disasters.

  • Purchasing Land

Regardless of whether you’re a novice farmer in search to buy land or if you’re looking to expand your area, loans will significantly aid you in purchasing land. Since your purchase could also be tricky as you’d have to consider the farm’s type of soil, your loan can help you finalize your contracts and make early-down payments to earn an upper hand from competitors.

  • Investing And Making Improvements

Since you need money to earn your land, you’ll need a huge stash to upgrade or improve your materials or land. You’ll also need to maintain your farm to run more efficiently – so you will have to upgrade your infrastructures. Likewise, doing so will also boost your farm’s value and ultimately improve your products.

  • Marketing And Advertising

With expanded land and improved equipment, you’ll need to spread the word through campaigns and marketing. With this, your loan could support your marketing tactics when you talk to a consultant, invest in online marketing or even get a hand in traditional marketing such as newspapers and magazines.

How Do You Qualify For The Loan?

Although applying for your loan may take time, it can significantly aid your business in the long run. With this, you’ll first have to determine the loan you want and contact a reputable lender if you’ve chosen the type. Your type could vary according to your need, so it’s best to get acquainted with each – which could be crop loans, farm operating loans, dairy loans, etc.

After you determine the type of loan you need, it’s time to contact a suitable lender. For this, you’ll need to have a good credit score as this is the first thing they’ll probably look at. Likewise, your lender could even ask you what your business plan is. With this, you should be transparent about your situation, how much you can pay, and your goal.

What Do You Need To Qualify?

Although different lenders will require additional paperwork, it never hurts to be prepared for any situation. For this, you’ll have to prepare necessary documents such as tax returns, profit statements, financial statements, an overview of your crops, and even a year-end balance sheet. With a year-end balance sheet, you should have your accounts highlighted (accounts payable, inventory for your products, and a list of infrastructures.

Likewise, your credit score needs to be good as this will determine how much you can get and even the interest you should pay. Thus, ensuring that you have a good credit score will significantly help you earn the best loan there is.

What Are Other Tips You Will Need?

If you don’t have a good credit score, you could even gather proof of your experience and expertise. Although lenders will look at your credit score, your background in the industry could greatly help as well. Once you establish your significant experience, your loan can be approved even with a low credit score.

Likewise, other factors can help as well, such as business plans or high-value assets. You could even include these items in your loan application to add more excellent value, giving you the funding you’ll need.


Although applying for a loan can be meticulous, and running a business may have unexpected challenges, doing so will indeed be worth it in the end. With the help of agricultural loans, you’ll be secured and prepared for anything that may happen; you could even improve materials and upgrade product quality. Ultimately, your business will thrive and generate profits – as you have an operating loan to back you up.

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