A loan for your farm is an investment in your business by another entity. Your lender wants to know that the money they invest (via a loan) is going to give them the returns (interest and principle) you promise.
In addition to financial factors – do you have collateral? Is there a business plan in place? – your lender will want to see that you have a solid understanding of business requirements, in addition to an ability to perform or effectively delegate business functions.
Taxes and Accounting – Do you know the difference between operating expenses and capital purchases, and account for them appropriately? What taxes will your business be liable for? When do you need to make deposits for employee withholding and your own tax liability? Do you show smart decision-making when it comes to timing purchases to manage tax liability?
Insurance – What kinds of insurance does your enterprise require? Farm vehicles may require additional commercial coverage if driven by employees. Certain customers may require product liability insurance. Farmers markets may require certain levels of liability coverage.
Legal Requirements – What regulations does your farm face? Are there labeling restrictions to the way you want to market your product? Where can you sell your product? What inspections or licensing do you or your processor need to get into the markets you want to access with the form of product you are proposing to sell? Do your trucking plans require special licensing? What are the environmental and zoning regulations that apply to farms and facilities in your state and county?
Employment Compliance – Does your plan for hiring and compensation meet legal requirements? Do you understand state and federal overtime rules and when you need to comply with them? Have you arranged for workers compensation insurance? Are you clear about if and when your farm’s activities stop being “farm activities” as defined in your state? Do you aware of the requirements of OSHA and the Worker Protection Standard as they apply to your operation?
Showing that you understand the business shows that you understand what it takes to not get derailed by the “not farming” part of farming.
In addition to financial factors – do you have collateral? Is there a business plan in place? – your lender will want to see that you have a solid understanding of business requirements, in addition to an ability to perform or effectively delegate business functions.
Taxes and Accounting – Do you know the difference between operating expenses and capital purchases, and account for them appropriately? What taxes will your business be liable for? When do you need to make deposits for employee withholding and your own tax liability? Do you show smart decision-making when it comes to timing purchases to manage tax liability?
Insurance – What kinds of insurance does your enterprise require? Farm vehicles may require additional commercial coverage if driven by employees. Certain customers may require product liability insurance. Farmers markets may require certain levels of liability coverage.
Legal Requirements – What regulations does your farm face? Are there labeling restrictions to the way you want to market your product? Where can you sell your product? What inspections or licensing do you or your processor need to get into the markets you want to access with the form of product you are proposing to sell? Do your trucking plans require special licensing? What are the environmental and zoning regulations that apply to farms and facilities in your state and county?
Employment Compliance – Does your plan for hiring and compensation meet legal requirements? Do you understand state and federal overtime rules and when you need to comply with them? Have you arranged for workers compensation insurance? Are you clear about if and when your farm’s activities stop being “farm activities” as defined in your state? Do you aware of the requirements of OSHA and the Worker Protection Standard as they apply to your operation?
Showing that you understand the business shows that you understand what it takes to not get derailed by the “not farming” part of farming.
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