Do you have an excellent agriculture business idea? Are you now looking for financing options? Whether it’s a small-scale backyard business or a startup that requires huge capital investment, funds are crucial to set things in motion.
Well, in India, your ingress into the agri-business world is fairly hassle-free. Yes, thanks to the easy availability of business loans for agriculture. Here is a guide to understanding how to get agriculture business finance in India.
Features of agriculture loans
As an agricultural business owner, you can receive financing not just for crop cultivation but any agriculture-related activities. This includes animal husbandry, garden crop cultivation, floriculture, aquaculture, silk farming, bee-keeping, and securing resources such as fertilisers, machinery, agricultural equipment, etc.
You can apply for loans to run your daily operations, purchase land, expand your business, buy the latest equipment, market your products and services, protect inventory, and more. These business loans can be short, medium, or long term.
As per the Reserve Bank of India (RBI) guidelines, you can get a collateral-free loan for up to Rs. 1 lakh. For loan amounts exceeding that, the collateral requirements depend on lenders.
How to apply for agriculture loans?
The agricultural loan application process varies for different lenders. Nowadays, you can apply for loans online as well. However, before approaching a lender, it is crucial to research business loan interest rates, benefits, loan tenure, eligibility, features, and terms and conditions.
Besides, borrowers must read the fine print and look for hidden costs beforehand. The standard procedure involves filling a loan application and the KYC form and attaching necessary documents.
Here are the common documents required for agriculture business finance.
- Passport size photographs
- Identity proof such as Aadhar, PAN, Voter ID, ration card, etc.
- Address proof such as passport, electricity bills, water bills, etc.
- Income proof, bank statements, ITR filing, etc.
- KYC documents
- Quotations from vendors for equipment purchase
- Land ownership proof if applicable
How to increase your odds of getting a loan?
To improve your business finance eligibility, you must build a good credit score, preferably between 700 and 900. Besides, keep your credit history debt-free and pay off any exiting liabilities and loans before opting for a new one. While applying, prepare a written detailed plan on how you plan to use the funds.
To conveniently repay the loan, take into consideration potential profits, account losses, and decreased profits. Use a business loan EMI calculator to calculate your EMIs and interest payable and plan your repayment in advance.
Moreover, always apply for a loan best suited to your business’s financial requirements. If you file multiple loan applications, it can affect your credit score negatively.
Additional Read: Does Good CIBIL Score Guarantee SME Loan Approval?
Many lenders support agriculture businesses by providing quick business financing. Conduct thorough research, display a strong repayment intent, and maintain a good credit history to secure your agriculture loan.
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