From Dreaming to Doing: 4 Ways to Finance Your New Agribusiness

Like sun and water for seeds, your new agribusiness needs money to launch and grow. In this guide, you’ll learn about common financing options for startup agribusinesses in the Hudson Valley and beyond to help you choose the best path forward, whether your goal is to start a small family farm, launch a farm-to-table restaurant, or start any other type of agriculture-based business.

Self-funding: Using your own resources

Think of self-funding (also called bootstrapping) as being your own bank. You use personal savings or assets, such as home equity or a loan from your retirement account, to start your business. Self-funding works best if you have enough available savings to launch and get through several months of operations.

• Pros: When you use your own money, you can launch as soon as you have enough saved. You won't have to pay interest or share profits and you make all the decisions about your business without worrying about investors, lenders, or anyone else.

• Cons: Using personal savings comes with huge risks because you’re putting some or all of your personal savings and other assets, like equity from your home, on the line. As a result, you might spend money you need for other things like living expenses, college, or other goals. In addition, your launch and growth are limited by how much you have saved.

• Takeaway: Self-funding is the most common way for small businesses to launch, but because there can be a risk to your personal financial health if your business doesn’t work out, you should only invest as much as you’re comfortable potentially losing.

Launching through crowdfunding

With crowdfunding, you share your business idea online through websites like Kickstarter or GoFundMe in the hope that people will contribute to your campaign and help you get started.

• Pros: This method works well if you have a strong online community and an exciting new product. It enables you to launch without taking on debt. It's also a great way to see if people are interested in what you want to offer before you start.

• Cons: It’s typically best for product-based businesses. It also takes a lot of social-media presence, marketing, and promotion to reach your funding goal. If you don’t achieve your goal, you may not get any funding. And, crowdfunding platforms typically take a cut of up to 12% of what you raise, reducing your final amount.

• Takeaway: If you have a great product, a significant online presence, and the time to promote your campaign, you could get the financing you need while building your brand and community support. But, because it’s not a sure thing, it’s good to have an alternate financing plan.

Community Development Financial Institution (CDFI) loans

CDFIs are lenders with a mission to help small businesses get financing to launch and grow. With economic development and jobs as key goals, CDFIs have more flexible lending criteria than banks. While CDFIs consider criteria like your personal credit history, they also consider the bigger picture of your business and goals as part of their approval process, which can make it easier for a startup agribusiness to get a loan.

• Pros: CDFIs have a range of small business loans with competitive interest rates and repayment terms that make loans easier to pay back than many other types of financing. Qualifying for a loan through a CDFI can be easier than a bank because CDFIs have more flexible lending criteria. In addition, some CDFIs specialize in financing specific types of business. HVADC, for example, specializes in helping farms and other agribusinesses. This means that HVADC’s team understands the kinds of challenges and opportunities that agribusinesses face and can work with you on financing that best meets your needs and goals.


• Cons: The application process can be longer than other options, depending on your business and the type of loan. This is because CDFIs customize loans for your business to ensure they are easier to repay, so it’s often worth the wait.


• Takeaway: CDFIs are excellent options for startup agribusinesses because in addition to providing loans, they take the time to get to know you and your business goals to ensure that the financing you receive is best for your business. Given this, it’s wise to contact CDFIs before you need financing to take advantage of the small business resources they offer. They can help you strengthen your business plan, improve any areas that need extra help (such as your plan or credit score), and best position your new business for financing.

SBA and USDA loans: Government-backed support

Although the U.S. Small Business Administration (SBA) doesn’t lend money directly, the SBA created loan programs that make it easier to get farm loans and other types of agribusiness financing. In addition, agribusinesses may be eligible for U.S. Department of Agriculture (USDA) loans through your county’s Farm Services Administration (FSA) office.

• Pros: These farm loans are designed to help fund small businesses when you may not be eligible for bank loans yet. They provide financing with lower interest rates and longer terms, so monthly payments may be lower than through traditional bank loans.


• Cons: These loans may include filling out more paperwork and submitting more information than some other types of funding. For example, you'll need to have your business plan and financial projections ready, as well as personal tax returns. In addition, it can take a little longer to get the funds in hand.


• Takeaway: The flexible eligibility and approval criteria and beneficial terms make these great options. Even though the process may take a little longer than some other types of financing, part of the process is to ensure that you get the best loan amount and terms for your business to support your success.

How to get ready for business financing

For agribusiness loans, there are some things you’ll need to prepare:

• A clear and thoughtful business plan: This should show what you want to do and how you'll make money. Include research into your market and competitors. Another piece that’s very important to lenders is your financial projection. This shows them how much money you expect to make and spend. The better you can show a lender that you researched the costs, the more credibility and trust you’ll build, so include written estimates for equipment or renovations, for example. Keep in mind that it’s best to be realistic in your projections and that it’s okay to show a loss the first year or so–lenders understand that most businesses take time to become profitable.

• Good personal credit: Since your business is new, lenders will look at your personal credit score. Pay bills on time and try to reduce personal debt. It's also smart to check your credit report for any mistakes. Here’s an important point to keep in mind: When you work with CDFIs and SBA lenders, they have more flexibility, so if your credit isn’t perfect or if you don’t have a long credit history, don’t be discouraged. Instead, meet with them to learn how they can help you.


• Collateral: For some loans, lenders may want something valuable to be pledged for security, in case you can't repay the loan. This could be personal items like your house or car or business items like equipment you plan to buy.


Take your time to understand your options and make choices that will help your agribusiness. And don’t be discouraged if a lender can’t fund your plan the first time around—ask them for feedback, listen to their concerns, address them, and try again.

The HVADC Agribusiness Loan Fund can help

Choosing the right funding path and the right lender are just as important as choosing the right crops to plant or products to sell. HVADC can help through the Agribusiness Loan Fund. It includes loans tailored to the needs of farms and agribusinesses in New York’s Hudson Valley region, including financing for working capital, equipment, real estate, leasehold improvements, business expansion, and bridge/gap funding.

When you’re ready to explore funding options or to seek business resources in the Hudson Valley, reach out to HVADC for help.