Farmers have to give up bank loans

As the economy grows, more and more Lithuanian citizens are engaged in various forms of business. These entrepreneurial people are not afraid to take risks, they want to be free and not dependent on employers. They want to plan their time and do the business they like. Today we will talk about farmers who have a very special form of business and the access to credit for these businesses.

Is it possible for a farmer to get a loan at the bank

Is it possible for a farmer to get a loan at the bank

When the bank’s employees inquire about the possibilities for a farmer to obtain a loan for the development of the farm, we find out. That the conditions are the same as for other forms of business.

This means that the farmer opting for an individual business form will have to submit a detailed application to the bank, which is like a business plan, in order to qualify for a farm loan. It must include all information on the farm’s cattle, perennial crops, annual crops, areas under management and declarations, direct payments and income from sales.

Also variable, fixed farm costs and other general farm costs

Also variable, fixed farm costs and other general farm costs.

Available farm staff and associated costs. Available long-term, short-term and biological assets of the holding. Available long-term and short-term farm liabilities. There are short-term and long-term farm loan agreements, cooperation agreements, leases, utilization agreements and many other documents.

But the bank is asking not only for a detailed business plan, but also for detailed business forecasts of five or ten years. If the farm loan requested is for a period longer than 10 years, then forecasts are needed for the period for which the farm loan is expected to be repaid.

A business plan is just one of the required documents. You will also be asked to provide an annual, semi-annual or even quarterly balance sheet, income statement, cash flow statement. Explanatory notes for the last few years and any such forecasts for a period of five or ten years.

Preparing documents is not only time consuming

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Preparing such documents will not only cost the farmer several months of labor time, but also a considerable amount of money. Often, an individual farmer needs to contact his financiers or business consultants to help prepare the bank’s documents.

However, once all the necessary documents have been prepared, it will take another month or two for all the documents to be evaluated by the bank and the decision to grant the loan to the farmer or refuse to grant the credit. According to statistics provided by Lithuanian banks, only 5 – 10% of all the clients who have received the loan are persons working on the basis of a business license or certificate of individual activity. This data shows that there is a high likelihood that you will not be able to obtain a farm loan.

If you do not have a loan for economic development, you can of course apply to another bank. However, it will have a completely different business plan preparation, application form and all the documents you will need to fill out again, and of course the business plan preparation, application evaluation and loan granting will take several months.

Business people are well aware that time in business is a very important aspect, as the business environment in Lithuania can change dramatically in a few months. As a result, further business plans may change drastically.

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