Get Your Agribusiness Loan-Ready: 8 Simple Steps to Success

If you have big dreams for your agribusiness, chances are that it will take funding to make them a reality. Before you apply for a loan, it’s important to know that the secret to getting the funding you need doesn’t begin with an application—it starts with great preparation.

Our guide will walk you through eight simple steps to get your business loan-ready and put you on the path to success.

Step 1: Make your business plan shine

Your business plan tells your story, including what you offer, your goals, insight about your competition, and how you’ll reach your target markets. For lenders, the most important point is to explain why you’ll succeed when you get the funds you need. Show your plan for using the requested loan amount by specifying how much you need to borrow, detailing the specific uses of these funds, and demonstrating how this investment will generate revenue to ensure loan repayment while building a more profitable business.

Step 2: Know your personal credit score

When you apply for loans, you need to help lenders understand that you and your business are solid investments. Your personal credit history is essential to these decisions and to meeting agricultural loan requirements. For this reason, knowing your personal credit history and score are important.

Start by checking your personal credit reports. You can get them for free from the major credit-reporting agencies, Equifax, Experian, and TransUnion. Look for mistakes and fix any errors you find. It’s also important to pay your bills on time and try to reduce any debt you already have—you can follow your progress through free sites like Credit Karma.

The better your credit score is, the more loan options you’ll have, but don't worry if your credit isn't perfect. While banks tend to have strict lending criteria, there are other responsible lenders that can be more flexible. These include non-bank and non-profit lenders, such as community development financial institutions (CDFIs). HVADC is a CDFI that specializes in helping farms and other agribusinesses to launch, grow, and build profitable enterprises.

Step 3: Build your business credit score

Building a strong business credit profile is another crucial step in becoming loan-ready. Your business credit score, which is separate from your personal credit, helps lenders evaluate your business's ability to manage debt responsibly. Establishing good business credit can improve your chances of loan approval and potentially secure better interest rates and terms.

To build your business credit, start by obtaining a business credit card and using it for regular expenses while maintaining timely payments. Keep your credit utilization below 30% of available credit and ensure all business bills—from vendors to utilities—are paid on schedule. This demonstrates to lenders that your business consistently meets its financial obligations.

Step 4: Have your financial records ready

Lenders want to see that you track every dollar that comes in and goes out and clear financial records show that you manage your business well. Consider using accounting software, like QuickBooks or Xero, to keep track of your finances, or think about hiring a bookkeeper. Most agricultural loan requirements call for having updated and accurate profit-and-loss statements, balance sheets, and tax returns. If you're behind on your taxes, make getting them done a top priority—many lenders won't consider your application without current tax returns. You’ll also want a clear sense of how much debt your business currently has, as your lender will ask for this information.

And remember, keeping your financial records organized year-round is much easier than scrambling to get everything in order when you need a loan.

Step 5: Look to the future with financial projections

Lenders want to know that your business will make enough money to repay the loan and that's where financial projections come in. When doing your projections, it’s important to explain how financing will help your business grow. For example, if you're buying new equipment, show how it will help you produce more or save money. This helps lenders understand why investing in your business is a smart choice.

Think about how much money your business will make and spend over the next few years and be realistic. It’s better to make careful estimates than to promise more than you can deliver.

Step 6: Figure out your magic number

Before you ask for a loan, you need to know exactly how much money you need. Make a detailed list of everything you want to buy or invest in. Get written quotes for equipment or other big purchases and don't forget to include extra costs like shipping or installation. You’ll also want to reference your financial projections to ensure you have enough working capital.

It's okay to add a little extra for unexpected expenses, but be ready to explain why you need every dollar, and be sure to borrow enough so you don’t run out of cash.

Step 7: Shop around for the right loans and lenders

Different lenders offer different types of loans, interest rates, and payment terms. Banks, for example, are more likely to lend for tangible things like equipment and real estate that can serve as collateral for the loan. When applying, be prepared to specify which assets you're willing to use as collateral—this could include equipment, real estate, inventory, or other business assets. They’re also more likely to lend to businesses that have been in operation for several years with strong financials.

The U.S. Small Business Administration (SBA) works with special lenders to offer loan programs designed to meet the needs of small businesses, including agribusinesses. These include CDFIs, like HVADC, and the Agribusiness Loan Fund, which is tailored to meet the needs of new and growing farms and agribusinesses. Take time to research your options and understand lender requirements to find the best fit for you.

Step 8: Piece together your funding picture

Think of funding like putting together a puzzle—many pieces are often needed to make the whole picture work. To put together your funding picture, you may need to approach several lenders.

Let’s say that for your business, some of the funding will come from your savings or other owner equity, but you need an additional $50,000 for equipment, $5,000 for installation, and $10,000 for working capital. It may be possible to get all the financing you need from one type of loan or lender, or you may need to shop around for separate financing. The better you can break down your financing needs, the more likely you are to find a range of good options. Consider, too, whether you qualify for agricultural grants for pieces of your funding puzzle.

The HVADC Agribusiness Loan Fund can help

Lenders want to see that you're responsible about borrowing money, have a solid plan for using it to grow your business, and will be able to repay it as promised. By following the steps in this guide, you'll be better prepared to make the case for why they should invest in your business.

If you need help getting started, contact HVADC. We’ve helped agribusinesses throughout the Hudson Valley to secure loans and grants to thrive and grow and we can help you, too.