2021 - Debbywryte



One of the most popular complaints you hear from farmers is lack of access to funding. It is a valid complaint because funding is a real problem faced by real farmers in a very real world. As a farmer, you will need money to either start a new Farm Business or to expand your current operations.


Generally, there are three most common types of funding you can get for your farm; they are loans, grants and equity. Of these three loans and equity are the more known but not necessarily best options. Let's briefly consider these three options individually and then present a general overview of what each entails.



At some point or the other, every farmer has borrowed money from one source or the other. Loans are the commonest sources of funding for farmers although it has been reported that farmers encounter serious difficulties in their bid to borrow from banks. This is especially so for small-scale farmers who usually lack the collateral needed to obtain the loans. Also, farmers are usually afraid to take loans from banks and other commercial institutions because of the very high-interest rates and inflexible repayment plans. Common sources of loan include; commercial banks, government institutions and specialized agencies, other financial institution cooperative societies etc.



Equity funding is a form of partnership in which people invest money on your farm in exchange for some portion of the ownership of the business including profits. Depending on the terms you agreed on with your investors, they will have a say in the running of the farm especially as regards the crucial decisions that will affect the business. Equity is preferable to loan because there is no repayment of the money invested. Another advantage of equity investment is that your investors do not usually expect an immediate return on their investment as is the case when you take a loan. However, to enjoy all these benefits, you will give up some control of your farm. Moreover, profit sharing may in the long run even cost more than the interest charged on any loans you take. Note that equity investors will only invest in farms that have a good management history and business traction.



Grants are a very viable type of financing. Unfortunately, grants also happen to be the least explored options and for many reasons. First of all, a large number of farmers know next to nothing about agricultural grants and how to access them. If you look well, there are more than enough agricultural grants and aids for which your farm may be eligible. Of course, you will be up against several other farmers, but you stand a good chance if you do your homework well. (Read everything you need to know about agricultural grants). 



For farmers, grants can come in cash or kind. You may be given monetary assistance, agricultural inputs or farm equipment. This is a very good option for small-scale farmers who do not qualify to borrow from commercial banks and do not have juicy ROI potentials to attract equity investors. Grants combine the advantages of the two other options for funding; money received does not need to be repaid and you also do not lose any control of your business by accepting the funding. On the flip side, almost every farmer who has attempted to apply for grants agrees that the application can be time-consuming. Not only is this so, but also the processes involved as such that you cannot make actionable plans around grants you are expecting. Furthermore, although it may not be too popular around here, grants are a big deal in many other countries and so you will be up against several other equally qualified farmers from around the eligible region.


Should I take Loan, call for Investors, or apply for Grants?

In most cases your business objective as a farmer will determine the source or type of funding you will consider. If you are not keen on collaboration or partnership with others you will most likely opt for a loan or apply for grant, whereas a farmer who is interested in partnership will consider equity as a viable option. One thing is applicable in all cases though, and that is the Farmer must be prepared for whichever option he settles for. Every time you apply for funding –either loan, equity or grants, there are documents that will be specifically requested. Generally, you will be required to have for sighting; farm sales records, farm accounts, expenses accounts etc. 


So how about that ‘Free Money?’

Come to think of it, is there really any such thing as ‘free money’? Sure there are people who would give you small amounts of cash here and there, but when people talk about free money what they are usually referring to is a lot more bigger than a mere dash. This amount is usually enough to set up your business or make substantial changes to it. The mindset of the free money school of thought is that there is no responsibility that comes with this kind of financing. In other words, you may as well not use the money for the purpose it was disbursed and you will not be held accountable or liable.


If this kind of funding ever existed, it is now long dead and has been given a befitting burial. Anyone who is kind enough to invest huge sums of money in your business will certainly be wise enough to put in place monitoring mechanisms to ensure the project's goals are executed as stipulated. Every institution has its own custom made monitoring mechanism. Some banks, for instance, may send a team of individuals to your farm to investigate the implementation of the loan application they granted your business. Contrary to popular –yet erroneous- opinion, grant money is also subject to monitoring. The organization giving the grant would usually request a periodical report showing the progress of the projects they are sponsoring. This report may include pictures, videos and the likes.


Beyond these three, there are other ways you can access funds for your farm business. Money is important, but money is not all that there is to funding. How about you work on your creditworthiness so that people can actually trust you with agricultural inputs that you can pay for after sales of your products? This is one of the very effective ways you can continue in business irrespective the losses you may have incurred owing to the COVID 19 pandemic. 


In summary, don't depend on the limited finances you have especially now. Make the wise decision to reach out and get help; get funding for your farm operations; increase and leverage on your trustworthiness with input suppliers and get expert help along the way on whatever funding options you choose.

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Our team is always looking for ways to add value in the agricultural space. If you are interested in working with us on a project or just want to make enquires.

© 2021 Vetsark

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© 2021 Vetsark