Launching an agritourism business on your farm holds great potential, especially if you’re seeking new ways to earn extra income or even establish a new primary source of income.
But before you begin any business venture, agritourism included, it’s necessary to cultivate at least a fundamental understanding of finance.
Obtaining ag financing from a reputable ag lending company is almost always a piece of the business development process when launching an agricultural business. To ease the process, it’s wise to wrap your head around common issues where financing is concerned.
Although ag loan requirements and terms are unique to the lender you’re working with, a few common points apply across the board in terms of qualification standards and expectations, including credit history, business planning, and down payment capacity.
- Qualification Standards/Expectations: Details on standards and expectations can easily be obtained from your lender. Be prepared to explain the basics of your business venture to the lender in order to get their feedback on the best agriculture loan type or program to effectively achieve your business goals. Ask questions regarding the expectations that will be placed on you as the borrower. All of this will render the planning process more effective.
- Credit History: When securing new financing, a valuable asset is credit, especially when you and your lender do not have an established business relationship. Credit conveys your overall financial state, for better or worse. Bad credit? Be upfront with your lender because it’s not something you can hide anyways. Plus, financing can still be secured even if you have a less than stellar report. It’s just an obstacle that must be addressed by the lender in determining your best options.
- Business Plan: A clear business plan for your agritourism venture is paramount. The business plan must be a concrete explanation of the business. This business plan is what the lender will assess to gauge your seriousness about your future business idea. So, make it shine!
- Down Payment Capacity: What portion of the risk for your venture can you cover? This is an important factor in a lender’s evaluation. Most lenders like to see their borrowers have some skin in the game.