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10 tips on effective agricultural financing

Financing of agricultural enterprises is not easy, especially for starters. The unpredictability of the business makes it very volatile. Other tips of ensuring you save your capital are:

  1. Buy your inputs earlier before the demand goes up. This will ensure you get quality for less cost.
  2. Prepare land early. If you are hiring machinery, the last minute rush will cost higher and leave your land poorly prepared.
  3. Maintain a manageable labour force. You would rather take a few more days, but have the work done well and at minimal cost.
  4. If you take a loan, arrange with them to pay according to your farming schedule. If you get your crop in 3 months, you can arrange with them you just pay the monthly interest for the first three months and then you clear the principal on the fourth month after selling the produce. Ask your financier for the available repayment schedule. This will save you the high cost associated with borrowing money elsewhere to repay your loan.
  5. Create a good relationship with your financier to ensure repeated financing initiatives in future.
  6. Just like any other business venture,  start small and grow.
  7. Use your land according to your capital. If you have 10 acres of land and do not have capital to farm wheat, you can start with wheat on 2 acres and the rest you put a low cost investment like sheep field farming.
  8. Avoid storing produce for long. There is a cost associated with storage.
  9. Avoid long distance transport of produce. It increase cost and reduces its quality.
  10. Insure your crop or livestock, especially if you had third party financing; financing from someone other than self.

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