Effective tips while applying for agricultural loans

Agricultural loans are important for supporting farmers in their agriculture business since most farmers don’t have enough capital. Applying for such loans is not always easy. It requires various formalities to be completed, so one needs to know the basics before reaching out to a financial organisation for a loan. 

Farming has been a major occupation in India. Nonetheless, India’s agricultural sector has expanded over time beyond traditional farming to include aquaculture, floriculture, silk farming, horticulture, and eco-tourism. There can be significant variations in the financial needs of such businesses. With the rise in importance of the “Make in India” initiative, there has been a rise in the number of people motivated to pursue farming businesses. Read on to check a few things to remember while applying for agriculture loans.

Tips to follow while applying for an agricultural loan:

Here are the things you need to know while applying for an agricultural loan:

1. Know about agricultural finance companies:

Around 13 financial institutions and 7 leading banks are offering agricultural loans to farmers. Some of the agriculture loan schemes offered are Kisan Credit Card, Produce Marketing Loan, Land Purchase Scheme, Two-Wheeler Loan, Production and Investment Loan. Besides this, the financing agencies such as NAFA (Netafim Agricultural Financing Agency) also act as agricultural equipment finance companies. Having a thorough idea about the advantages of applying with a financing company over the other ensures choosing the right one.

1. Understand your financial needs:

You can determine the financial requirements based on the type of farming you pursue or plan to develop or if you only require agriculture equipment financing. This must be finalised before applying for the loan through a detailed examination of the financial markets, such as estimating the cost of machinery, fertiliser, seeds, and product marketing. Knowing these things ensures that you don’t take on too much debt. 

Furthermore, you can avail of agricultural loans to cover the expense of purchasing land or agricultural instruments, storing and transporting produce, and the cost of ploughing land for sowing, weeding, and transplantation. You can also avail of KCC (Kisan Credit Card) for working capital requirements, introduced as a financial product in 1998 to provide hassle-free credit to farmers. 

iii. Arrange all the documents:

The financial institutions lending agricultural loans are quite particular about comprehensively getting all the paperwork to grant a loan. It is crucial even when you are expanding your farm infrastructure. Common documents include:

• ID proof such as voter ID card, driving license, Aadhar card, or others.
• Kishan credit card.
• Proof of residence includes ration card, passport, electricity bill, or telephone bill.
• Papers of your property, including proof of owning agricultural land, or leasing it, any copies of revenue receipt, and other related documents.
• Business plan, if applicable.
• Proof related to the enrolment in any government schemes 

1. Check your eligibility for a loan:

No matter what type of farming you are into, all the tenet, marginal, or sharecroppers are eligible for applying for farm loans. The minimum age for applying for a loan is 18 years, and the maximum is 65 years.

1. Have a clear idea about interest rates:

Business loans generally have a high-interest rate, but for making it easy for farmers, agricultural loans have a low interest per annum. Check for any subsidies that farmers are eligible for on short-term loans to lower the interest further. The exact interest rate would vary from one bank or NBFC to another based on the type of farming and the amount of loan needed. So you should compare interest to make sure to avail the best rate. 

1. Online loan application:

After gathering all the required documents, check for online application of the loan in the concerned bank. Today, most banks and NBFCs offer the facility of online application of loans. Bank/NBFC will process the loan application by submitting the documents online/offline. You can follow up in a week if the loan approval status is not intimated to you yet.

vii. Check for offers:

While applying for an agricultural loan, check if the bank offers flexible part payments and ease of accessibility to value-added services, if any.

viii. Know the features of agricultural loans:

Here are some features which you will be enjoying with agricultural loans:

• You can avail of the agricultural loan to meet the expenses of purchasing new farmland, cattle, or even to manage the operating costs.
• The repayment tenure varies according to the end-user and the type of loan available.
• The documentation needed for applying for an agricultural loan is simple and minimal.
• Secured and unsecured agricultural loans are available based on the loan quantum and the applicant’s profile.

Conclusion:

Among the various Agri finance companies in India, it is important to rely on those which perfectly meet your needs with the least hassle. There are agriculture NBFC in India like NAFA, which covers over 18 lakh acres of farms of more than 8.5 lakh farmers. Access to finance has long been a major barrier in adopting micro-irrigation, which NAFA has effectively addressed since getting an RBI licence and beginning its operations in March 2013.